FX Energy Speculative Buy Rating Maintained; The Quality And Duration Of Production, Which Will Help Quantify Exposure To What Could Be Huge Amounts Of Gas In Poland
Les W. Childress
August 09, 2006. We believe FX Energy (Nasdaq: FXEN) has significant growth potential through exposure to additional development and exploration for natural gas in Poland's Permian Basin. FX Energy's large land position in Poland encompasses three major areas totaling 1.7 million acres. Having operated in Poland since 1994, FX Energy has been able to establish a strong working relationship with the Polish Oil and Gas Company (POGC) and secure the POGC as a partner and, as a result FXEN has made spending commitments in Poland entitling it to earned interests in three natural gas fields in areas known as Fences I, II and III. Although FX Energy's shares have been weak lately, we believe an upward bias has begun as global investors seek opportunities spawned by geopolitical events that directly influence natural gas demand throughout Europe and Eastern Europe specifically. Over the next two to three years the real play for investors in FX Energy, in our opinion, is not how quickly they reach production in Poland but the quality and duration of production, which will help quantify exposure to what could be huge amounts of gas. It is possible that the Company could be exposed to as much as 2.4-2.8 trillion cubic feet (Tcf) of gas reserves in Poland. Moreover, a new higher natural gas price plateau in Europe has recently emerged as gas demand, especially in the United Kingdom, accelerated last winter. Recently, Gazprom suggested that prices in Europe could increase again in coming months.
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Amaru (AMRU.PK): IPTV Roll-Out on Target; Reiterate Neutral on Valuation
Rafael K. Kapelinski
August 09, 2006. Our stance on the stock has become incrementally more positive. Most importantly, we believe that the Company is seeing strong demand for the PONY set-top boxes in both the USA and Singapore. We reiterate our Neutral rating on Amaru as we continue to view the current valuation as slightly on the aggressive side.
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Elron Increases Stake In Largest Holding, Given Imaging (Nasdaq:GIVN)
Barry Raeburn
August 09, 2006. Elron has purchased approximately 540,000 shares of Given Imaging Ltd (Nasdaq:GIVN), in a series of open market transactions. The total aggregate purchase was estimated at $10 million. This equates to an average price of $18.51. This purchase raises Elron's percentage ownership to approximately 21.2%
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Customs Issues in China Likely to Impact 2006 Results, Reiterate Strong Buy
Rafael K. Kapelinski
August 09, 2006. We reiterate our Strong Buy on Xaar (LSE: XAR). We admit that our 2006E forecast appears aggressive given today's announcement about some of the Company's customers being investigated by the Chinese customs authorities and the reportedly sluggish trading environment. Although the magnitude of the impact of the investigation on the Company's 2006 sales is anybody's guess at this early stage, we believe that the current share price presents a great entry point. We continue to argue that Xaar presents a very attractive long-term investment opportunity as the key enabler of the ongoing transition to digital printing. The Company has a great product, targets a fast-growing market and is very well-managed. We leave our estimates unchanged: we will adjust them on September 13, when the Company presents a full set of 1H 2006 results.
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Market Consolidation; Internet Gold One of the Top Three Players, Reiterate Buy
Rafael K. Kapelinski
August 08, 2006. In our view. following the NetVision / Barak merger, Internet Gold / Golden Lines should emerge as the second largest ISP in the country with around 450'000 broadband customers and the largest international telephony player. As we have already stated, according to the management, the ongoing conflict in Lebanon has already impacted the Company's advertising revenues. However, a pick up in ISP and international telephony revenues have more than offset the slack. We will expect the Company to provide some insight into the overall margin impact on the 2Q call on August 10. We reiterate Buy rating and a price target of US 8.
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O2Diesel received funding of more than $1 million to verify its proprietary fuel as a Diesel Emissions Control Strategy in California. Speculative Buy reiterated.
Sally H. Wallick, CFA
August 08, 2006. O2Diesel received more than $1 million in Department of Defense funding to verify its ethanol-blended diesel fuel, O2Diesel(TM) under the California Air Resources Board (CARB) Diesel Emissions Control Strategy (DECS). This is good news since achieving verification as a DECS would expand O2Diesel's potential markets in California and elsewhere. Testing to verify O2Diesel's emissions benefits will begin once testing plans with CARB are finalized. We rate O2Diesel common Speculative Buy.
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Oragenics Issued Fourth U.S. Patent for Lead Antibiotic; Reiterate Speculative Buy Rating
Wayne M. Lottinville, CFA
August 08, 2006. Oragenics, Inc. (Amex: ONI) announced August 7 that the U.S. Patent Office issued a fourth patent that further describes the composition and uses of the company's exclusively licensed novel antibiotic peptide, MU1140. The patent claims include uses of the antimicrobial peptide for the treatment and prevention of bacterial infections. MU1140 represents a major new class of antibiotics and one day could become a clinically useful tool against those bacteria that have grown resistant to existing antibiotics.
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Telkonet Inc. Adds Additional Wi-Fi and IP Services Deployment in New York City at Trump Properties
Richard W. West, CFA
August 08, 2006. Telkonet Inc. (Amex-TKO) Announced Today the Addition of Wi-Fi and IP Services Deployment in New York City At Trump Properties. Strong Speculative Buy Rating Reiterated
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Wave Reported Strong Second Quarter Revenues
David P. Soetebier, CFA
August 08, 2006. Wave Reported Strong Second Quarter Revenues
Wave reported second quarter 2006 revenues of $910,000, compared to $258,000 in the year ago quarter and $493,000 three months ago. Revenues for license sales and Services were in line with our expectations. Gross margins were slightly below our estimate and expenses were slightly higher resulting in higher losses than our estimate. We have slightly reduced our revenue estimate for the 2006-year to $5.9 million from our prior estimate of $6.4 million. Our new estimated loss is $16.7 million for 2006 versus our old estimate of $15.6 million. Our 2007 revenue estimate remains $24.7 million. Our estimated loss for the year 2007 is now $961,000 versus our old estimate of a profit of $800,000 (losses in the first half profits in the second half). Our price target is $4.50 (adjusted from $1.50 to reflect the reverse split). The shares are rated Strong Speculative Buy
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BluePoint Energy, Inc. Announces $7.0 Million Master Agreement With Macy's East To Provide Energy Conservation Services
Richard W. West, CFA
August 07, 2006. Chapeau, Inc., d/b/a BluePoint Energy, Inc. . (OTCBB-CPEU) Announced today a $7.0 Million Master Agreement With Macy's East To Provide Energy Conservation Services over a 10 year period. The initial project under the Master Agreement should provide approximately $2.3 million in revenue to Blue Point. Additonal contract announcements are to be announced shortly. We are rainsing our rating to Strong Speculative Buy and increasing 12-month price target to $2.10 per share.
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Electric City Announced Today The Delay of Rights Offering Filing With The SEC Until After Labor Day
Richard W. West, CFA
August 07, 2006. Aug. 7, 2006 Electric City (OTCBB-ELCY) announced the delay of filing of a Resgistration Statemnet with the SEC for the proposed rights offering, until after Labor Day. Reiterate Speculative Buy Rating and $1.60 price target. We discuss the positive events that hafe transpired since the date of the 1:15 reverse split.
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Elron to Host Conference Call to Discuss Q2 2006 Financial Results
Barry Raeburn
August 07, 2006. Elron Electronic Industries Ltd will be discussing its second quarter fiscal year 2006 financial results on Monday, August 14, 2006 at 10:00am EDT. We maintain our Strong Buy rating and 12-month price target of $15. Our price target is supported by our NAV analysis, which reflects the current market values of publicly held companies, the net cash on the balance sheet, and our estimate of book value for privately held companies.
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Wave Systems Raises $4.8 Million
David P. Soetebier, CFA
August 07, 2006. On August 7, 2006--Wave Systems Corp. announced that on Friday, August 4, 2006, it agreed to sell 2,336,752 shares of its Class A common stock at a price of $2.05 per share for gross proceeds of $4,790,342. Wave furthur stated that based upon its current forecast, that it would need to generate approximately $10,600,000 from a combination of revenue growth, commercial or strategic transactions and/or additional financings, to continue as a going concern for the next twelve months. If our estimates are correct Wave will need to raise an additional $1.5 million over the next 12-months. We have a Strong Speculative Buy on the shares with a 12-month target of $4.50.
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Clearant Reports Second Quarter Results
Sally H. Wallick, CFA
August 06, 2006. Clearant's (OTCBB: CLRI) second quarter results were highlighted by an 85% year-over-year increase in licensing fee revenue and the first revenue contribution from the Company's new direct distribution strategy. On the other hand, total revenue declined year over year as a result of sharply lower nonrecurring contract research, milestone and grant income and was below our estimate. The Company's second quarter net loss was $0.06 per share, in line with last year's $0.06 per share loss and our estimate. Highlights of Clearant's quarter-end balance sheet included cash and cash equivalents of $4.6 million, working capital of $3.7 million, shareholders' equity of $5.4 million, and debt of only $106,000. Operations used $2.2 million of cash in the second quarter, down from $3.2 million in the second quarter of 2005 and $3.1 million in the first quarter of 2006. Management believes that Clearant's capital resources are sufficient to meet non-inventory related operating expenses and capital requirements through at least the end of 2006. However, we believe that cash requirements could be affected by a number of factors, including the Company's direct sales initiative. We reiterate our Speculative Buy rating on the stock. We consider the shares appropriate only for aggressive investors willing to accept the above-average risk inherent in a small company in the early stages of commercializing a new technology.
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LJ International To Explore Strategic Alternatives; Raising Our Target Price to $5.80
Sally H. Wallick, CFA
August 06, 2006. LJ International (Nasdaq: JADE) said that it is exploring strategic alternatives aimed at enhancing shareholder value, including the sale of a minority interest to a strategic partner and/or an initial public offering of the Company's ENZO retail division. There is no assurance that LJI will decide to pursue a strategic alternative, it plans no additional updates unless and until a specific transaction is approved, and it has set no time frame to complete this process. We believe that LJI's review of strategic alternatives is a strong indication of management's focus on maximizing value for shareholders. Also, capital raised from a transaction, if one is completed, could allow LJI to accelerate growth and a transaction could enable the Company to more fully realize the value of its businesses, especially the ENZO retail business in China, which we believe has well above average long-term growth potential. We reiterate our Strong Speculative Buy rating on LJI's share and are raising our target for LJI from $4.80 per share to $5.80 per share.
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Ampex Corporation Announces Second-Quarter Earnings Conference Call Scheduled For August 9, 2006
Richard W. West, CFA
August 04, 2006. Ampex Corporation (Nasdaq; AMPX) announces second quarter earnings release and conference call to be held on August 9, 2006. We preview the quarter and comment on current status of ongoing patent negotiations. Reiterate Strong Buy Rating and $30.00 12-month price target
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BluePoint Energy, Inc. and URS Corp. Accepted by State of California To Provide Energy Conservation Services
Richard W. West, CFA
August 04, 2006. August 4, 2006 BluePoint Energy, Inc. (OTCBB-CPEU) and URS Corp. Accepted by State of California To Provide Energy Conservation Services. The State of California Department of Corrections and Rehabilitation (CDCR) accepted a response to a Request for Qualifications (RFQ) to provide energy conservation services to 33 adult institutions and 7 juvenile justice facilities under the jurisdiction of the CDCR. This is one more step in the maturation of BluePoint to become a major provider of energy saving equipment with its Lean-One® CHP Module technology. We reiterate our Speculative Buy Rating and 12-month price target of $1.75.
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Electric City's Subsidiary, Parke Industries Completes Energy Lighting Retrofit; For A Leading National Seller of Super-premium Jjuices.
Richard W. West, CFA
August 04, 2006. Electric City Corp. (OTCBB-ELCY) announced today the completion of an energy lighting retrofit for a national seller of super-premium juices. This is the second retrofit project announced this week by Parke. These projects clearly validate Electric City's recent acquisition of Parke and demonstrate their new strategy of stressing commercial sales of electricity savings systems. We reiterate our Speculative Buy Rating
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Gigabeam to Miss Previous Guidance - International Distributor Contracts Terminated - Maintain Strong Speculative Buy
David Riedel
August 04, 2006. GigaBeam (Nasdaq: GGBM) announced this morning that they will miss previous guidance as a result of developments in their international business. This disappointment reminds us of the risk inherent in smaller early-stage companies. We maintain our Strong Speculative Buy rating on the shares and await additional information from the company.
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HydroGen: Makes Progress On Growth Strategies
Sally H. Wallick, CFA
August 04, 2006. We expect HydroGen (OTCBB: HYDG) to report second quarter results by the middle of August. Since HydroGen is in the early stages of commercializing its fuel cell products, we do not believe that the results will be indicative of its long-term potential. More important, in our opinion, will be evidence that the Company is achieving the goals set out in its business plan. Thus far in 2006, we believe that the Company has made significant progress on this plan:, its manufacturing facility in Versailles, Pennsylvania is now operational; demonstration plants are under construction; and management is in discussions with potential customers. Also, in May, HydroGen completed a $25.8 million (gross) private placement. We rate the Company's shares Speculative Buy. The Company is discussed in more detail in a Dutton Associates report dated May 9, 2006. We consider the shares appropriate for aggressive investors willing to accept the above-average risk inherent in an early-stage company that is not yet profitable.
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Maine & Maritimes To Report Second Quarter Results
Sally H. Wallick, CFA
August 04, 2006. We expect Maine & Maritimes (AMEX: MAM) to report second quarter 2006 results in mid August. We project a mid-single-digit revenue increase year over year, driven mainly by revenue growth at unregulated businesses, and a greater diluted loss than last year's $0.49 per share. Given the changing nature of the Company's businesses, our confidence in specific earnings estimates currently is below average. During the second quarter and thus far in the third quarter, Maine & Maritimes' unregulated businesses made measurable progress on their growth strategies. We reiterate out Speculative Buy rating on Maine & Maritimes common stock. We believe that the stock's valuation is attractive on a number of measures. It is trading at a deep discount to book value of more than $29 per share and we estimate the Company's worth at approximately $22-$26 per share on a sum-of-the-parts basis.
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O2Diesel Quarter Previewed.
Sally H. Wallick, CFA
August 04, 2006. We expect O2Diesel (AMEX: OTD) to report second quarter 2006 results by mid August. We anticipate a quarter similar to those reported in recent periods, with minimal revenue and a modest loss per share of perhaps $0.03 to $0.04 (before minority interest and deemed dividends to preferred shareholders). During 2005 and thus far in 2006, O2Diesel has made progress toward commercializing its ethanol-diesel fuel blend and raised nearly $18 million (gross) from private placements (including $6.5 million from two placements completed during the second quarter). We reiterate our Speculative Buy rating on the Company's common stock.
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Fushi International Rating Strong Speculative Buy In Initiating Coverage; Bimetallic Composite Wires For China Infrastructure Growth
Stanley Ng
August 03, 2006. We are initiating coverage of Fushi International (OTCBB: FSIN) with a Strong Speculative Buy rating. The Company is principally engaged in the manufacturing and sale of copper clad aluminum ("CCA") and copper clad steel ("CCS") wires, which are widely used in the telecommunications, power transmission cable, electrified railroad and comprehensive wiring industries. At present, most of the Company's bimetallic composite wires are sold in the domestic market to both local and foreign cable manufacturers, telecommunications and wiring companies. In our opinion, Fushi International offers investors a unique opportunity to invest in a rapidly growing industry with prosperous prospects due to sustaining massive infrastructure development and construction activities in China, including the rapidly expanding cable television broadcasting industry, mobile communication base stations, electrified railroad system, power transmission, and connecting wires for automobiles, indoor electrical wires, and connecting wires for instruments, apparatus, electronic devices and high-frequency connecting wire, etc. More importantly, the surging copper prices in the past two years have forced cable manufacturers and wiring companies that use large amounts of copper as their raw material for production to look for quality and low cost substitutes. This would effectively drive up demand for quality bimetallic composite wires. Revenues and EPS are projected at US$61.2 million and US$.65 respectively for 2006, growing to US$84.6 million and US$.93 in 2007.
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21st Century Reports 2nd Quarter and Six Months Results Surpasses Guidance & Estimates By More Than 20%
Richard W. West, CFA
August 03, 2006. 21st Century (Nasdaq: TCHC) Reports 2nd Quarter and Six Months Results Surpasses Guidance & Estimates By More Than 20%. Gross premiums up, total revenue up, expenses down, net income and EPS up. 21st Century in good shape to weather the 2006 hurricane season. Reinsurance treaties hedged against $300.0 million of possible losses. Reiterate Strong Buy Rating
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Clearant Expands Direct Sales Product Portfolio
Sally H. Wallick, CFA
August 03, 2006. Clearant (OTCBB: CLRI) has expanded the portfolio of CLEARANT PROCESS-treated products marketed by its sales force to include soft tissue implants for sports injuries, which the Company estimates enlarges its addressed markets from approximately $100 million to $350 million annually. It expects to add more products later this year, including lumbar spinal bone implants. One of Clearant's strategic goals is to accelerate revenue growth by direct marketing allograft implants to surgeons, hospitals and clinics. We believe that the unique characteristics of Clearant's technology make it a compelling treatment option and we are encouraged by the progress Clearant is making on its growth strategies. Therefore, we reiterate our Speculative Buy rating on the stock. We consider the shares appropriate for aggressive investors willing to accept the above-average risk inherent in a small company in the early stages of commercializing a new technology.
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Clearant Quarterly Results Previewed.
Sally H. Wallick, CFA
August 02, 2006. We expect Clearant (OTCBB: CLRI) to file its 10-Q for the three months ended June 30, 2006 by the middle of August. As discussed in previous notes, the second quarter was an active period for Clearant, culminating, in late June, in the initiation of direct sales of CLEARANT PROCESS-treated cervical allografts in some large markets. We believe that direct sales contributed little to second quarter revenue, but look for this program to become more meaningful beginning in the third quarter. Therefore, we believe that second half results will be more relevant for investors evaluating the success of the Company's new growth strategies. We believe that the unique characteristics of Clearant's technology make it a compelling treatment option, and we are encouraged by the progress Clearant is making on its growth strategies. Therefore, we reiterate our Speculative Buy rating on the stock. We consider the shares appropriate for aggressive investors willing to accept the above-average risk inherent in a small company in the early stages of commercializing a new technology.
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IntgraMed Posts Better Than Expected Results on Wider Margins and Strong Trends - Strong Buy
David Riedel
August 02, 2006. IntegraMed (Nasdaq: INMD) posted stronger than expected results for the period ended June 30th. Margins for this fertility service provider continue to widen as consumer services such as Shared Risk Refund show strong growth. Strong Buy
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LJI International's Earnings Previewed; Strong Speculative Buy Reiterated.
Sally H. Wallick, CFA
August 02, 2006. LJ International (Nasdaq: JADE) (LJI) plans to report second quarter 2006 results on August 10. Management's most recent guidance is for second revenue of $26 million, up 37% year over year, and diluted earnings per share of $0.04, up from $0.02 per share last year. Recent news suggests that LJI's wholesale and retail businesses were well positioned for growth entering the second half of 2006. On June 20, LJI announced that it had booked a record $22 million of new wholesale orders at the JCK Show, and, on June 29, it updated investors on the rapid expansion of its ENZO retail jewelry chain, which was exceeding expectations operationally and financially and making progress toward profitability. We reiterate our Strong Speculative Buy rating on LJI's shares.
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Baldwin Technology Expected to Report Solid Earnings; Reiterate Buy Rating
Wayne M. Lottinville, CFA
August 01, 2006. Baldwin Technology Co. Inc. (AMEX: BLD) is scheduled to release quarter and fiscal yearend earnings on August 10. At this time we expect reported earnings to be in line with projections of $0.12 per share for the quarter on sales of $48.8 million, and $0.40 per share for the fiscal year on sales of $181 million. Strong results reported today by customers and competitors support these projections. We also expect that currency adjustments would be positive for quarter as the dollar generally lost ground against major currencies in the period. Another positive is that the Company posted increasing orders and backlog in its March quarter. Sales trends in subsequent quarters generally follow the leads of reported orders and backlog. One possible negative: Baldwin announced no major orders during the quarter. In its prior quarter, the Company announced combined orders of $5.5 million.
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Electric City Announces Completion of Major Lighting Retrofit Project for Large Multi-location Auto Dealership
Richard W. West, CFA
July 31, 2006. Electric City Corp. (OTCBB: ELCY) announced on July 27, 2006, that Parke Industries (Parke), its recently acquired subsidiary, completed an energy efficiency lighting retrofit project for Galpin Motors, one of the world's largest automobile dealerships. This energy efficiency project, the first since the completion of electric City's recent financing and the acquisition of Parke, is an impressive event right out of the box for Parke and Electric City and is a win/win for Electric City, Galpin, the State of California and the environment. We reiterate our Speculative Buy Rating and our 12-month price target of $1. 60.
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ELRON Electronic Industries: NetVision Merger Discussions Progress, Favorable Valuation
Barry Raeburn
July 31, 2006. Elron (Naasdaq: ELRN) noted an independent appraiser, nominated by the parties, has estimated NetVision's valuation to be between approximately $122 million and $140 million. This valuation is 20-40% above Netvision's current market valuation. If these transactions occur, Elron's holding in NetVision would be reduced from approximately 39% to approximately 19%. However given the appraisal we would expect the appraisal we would expect the transaction to be modestly accretive to Elron NAV
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TMSF Holdings: Termination of Research Coverage
Richard W. West, CFA
July 31, 2006. Dutton Associates Is Immediately Terminating Coverage of TMSF Holdings.
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Touchstone Announces Change In Certified Accountant
Sally H. Wallick, CFA
July 31, 2006. Touchstone (OTCBB: TASA) announced a change in its certified public accounting firm to McGladrey & Pullen LLP effective for the interim period ended July 31, 2006 and the fiscal year ended October 31, 2006. Touchstone's Audit committee initiated a review of the Company's accounting needs when the Questar acquisition was pending. We believe that the Board concluded that McGladrey, which can service both its New York and Minneapolis operations, is better suited to its current needs than Lazar. We reiterate our Strong Buy rating on Touchstone's shares
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LESCO: Reports June 2006 Quarter
Paul J. Resnik, CFA
July 28, 2006. LESCO, Inc.'s (Nasdaq: LSCO), net sales for the quarter ending June 30, 2006, were $182.0 million versus $190.2 million in the comparable period a year ago. The Company reported second quarter 2006 earnings of $8.9 million, or $0.95 per diluted share ($0.58 a 39% tax-adjusted basis), versus earnings of $15.8 million, or $1.71 per diluted share ($1.04 on a tax-adjusted basis), in the same period in 2005. In all, this has been an extremely disappointing year. The shift away from a direct sales force last year was ill-advised and resulted not only in lower direct sales, as expected, but also a decline in same store sales which the Company did not expect. LESCO's urea supply contract played a role in a significant decline in gross margins. The Company changed guidance on July 6. At that time the Company indicated that it expected to report a loss for the year, assuming a tax benefit of 39%, on the order of $4 million. Reduced cash flow has been reflected in minimal share repurchases contrary to the original plan. Although we acknowledge the appeal of its Service Center business model, we continue to expect an operating loss for this year. Pending clearer signs of renewed sales momentum as the direct sales effort is reistated, we maintain our Neutral opinion despite the shares' recent weakness.
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Pacific Ethanol Nears Completion of Madera Ethanol Plant; Reiterate Strong Speculative Buy Rating
Paul J. Resnik, CFA
July 28, 2006. Pacific Ethanol, Inc. (NASDAQ: PEIX) is nearing completion of its first ethanol plant. The Madera, California facility has been scheduled to go on line in the fourth quarter of 2006, and we are unaware of any information that would indicate a delay in the project. Just the opposite, with ethanol prices significantly higher than originally anticipated in the Company's business plan, Pacific Ethanol has made every effort to accelerate the start-up. Although we believe that second quarter 2006 results which should be announced sometime within the next two weeks will have little relevance to share value, any announcements regarding the progress at Madera and at the plant site in Oregon and any new information about other potential sites could help support the shares. We continue to maintain a Speculative Buty Rating and a 12-month price target of $35 for these shares based on earnings per share projections of $0.45 in 2007 and $1.82 in 2008.
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corrected: Ampex Strong Buy Rating Maintained In Update; Our 12 Month Target Price Is Lowered To $30
Richard W. West, CFA
July 27, 2006. We initiated coverage of Ampex (Nasdaq: AMPX) on December 2, 2004. After registering an enthusiasm-driven intra-day high of $56.75 on January 24, 2005, Ampex's common stock recently sold down to register a new 52-week low of $10.10 on June 14, 2006. The initial impetus to recovery highs was the settlement by Sony (NYSE:SNE-$42.65) with a lump sum payment of $40.0 million. Since that time, Ampex has made significant progress in signing up additional licensees and paying down debt. However, with the recent paucity of news from Ampex concerning new license agreements and the general stock market malaise, the common stock was sold down to this recent low of $10.10. We believe that, at the current market capitalization, investors are ignoring the potential future royalty possibilities and that the market value of the stock is only recognizing the Data Systems business. Ampex continues with its active and aggressive strategy of licensing its intellectual property. Ampex has received over $130.0 million in royalties from the beginning of 2001 through March 31, 2006. Ampex is currently negotiating with these licensees to reach agreements for the use of additional Ampex patents that include their feed forward quantization patents used in digital still cameras expiring in 2012 and 2014.
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Clearant Rating Maintained At Speculative Buy Rating
Sally H. Wallick, CFA
July 27, 2006. We believe that the unique characteristics of Clearant's (OTCBB: CLRI) technology make it a compelling sterilization option, strengthening the Company's competitive position and enhancing its long-term growth prospects. We are encouraged by the growing acceptance of the CLEARANT PROCESS in the marketplace as indicated by Clearant's expanding roster of tissue bank customers. In addition, we are optimistic that management's aggressive efforts to boost sales and gain share will begin to pay off later this year. We are especially excited by Clearant's new direct sales strategy, which appears to have the potential to generate significant incremental revenue and profit long term. As part of this strategy, in June, the Company's sales force began marketing Company-owned cervical tissue treated with the CLEARANT PROCESS directly to orthopedic surgeons. We reiterate our Speculative Buy rating on Clearant common stock.
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Lantronix Expects Record Fiscal Fourth Quarter (JUNE) 2006 Revenues of $13.7 million. EPS Are Estimated To Be In The Range of $0.01 to $0.03 Per Share.
David P. Soetebier, CFA
July 27, 2006. Lantronix (Nasdaq; LTRX) expects record fiscal fourth quarter (JUNE) 2006 revenues of $13.7 million. Earnings per share are estimated to be in the range of $0.01 to $0.03 per share. The revenue estimate is slightly below our estimate of $14.3 million. Our fourth quarter earnings per share estimate is $0.01. Our revenue estimate was aggressive with the company historically reporting a fourth quarter with revenues sequentially below the fiscal third period. In this fiscal year's third quarter (March) the Company reported revenues of $13.65 million.Our preliminary fiscal 2007 estimate was for revenues to increase to the area of $68.8 million with earnings per share of $0.09. We believe management is being conservative in their fiscal 2007 guidance (even with 20% growth estimated) of $58 to $60 million but we are going to use it in our earnings model as our model has proven to be to optimistic relative to the ramp up in the device networking market. With the recent pullback in the shares we are upgrading the rating to a Strong Speculative Buy from a Speculative Buy
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O2Diesel Announces New CityHome Agreement
Sally H. Wallick, CFA
July 27, 2006. O2Diesel (AMEX: OTD) said that a South Dakota school bus and tour service provider will convert its fleets to O2Diesel(TM) through O2Diesel's CityHome(TM) program. The conversion will occur in two stages, with the school bus conversion beginning immediately and the tour bus conversion starting later in the year. CityHome is an innovative marketing program aimed at converting transportation vehicles to O2Diesel. The Dakota Trailways agreement is O2Diesel's fifth CityHome agreement. We rate O2Diesel common Speculative Buy.
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Wave Trading Temporarily Under New Symbol With Approval of 1-for-3 Reverse Split.
David P. Soetebier, CFA
July 26, 2006. Wave Systems Corp (Nasdaq: WAVXD) announced that shareholder's approved a 1-for-3 reverse split of the Company's Common Stock. The reverse stock split was effective July 26, 2006, with Wave's Common Stock trading temporarily under the symbol "WAVXD." The reverse split was implemented for purposes of regaining compliance with the $1.00 per share minimum closing bid price requirement for continued listing on the Nasdaq Global Market. Shareholders otherwise entitled to fractional shares as a result of the reverse stock split will receive cash payments in lieu of those fractional shares. Our price target is now $4.50 adjusted for the reverse split.
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Amarin Rating Raised To Strong Speculative Buy; Favorably Impressed With Amarin's Outlook
Stephen L. Handley
July 25, 2006. Amarin Corporation (Nasdaq: AMRN) is a neuroscience company focused on the research, development and commercialization of novel drugs for the treatment of central nervous system (CNS) disorders. We judge that Amarin's leading pipeline product, Miraxion™, which is undergoing Phase III clinical trials for the treatment of Huntington's disease (HD), has the potential to achieve U.S. sales in excess of $250 million for this application. It has been granted fast track designation by the U.S. Food and Drug Administration (FDA) for HD and has received orphan drug status in the U.S. and Europe. In addition, this compound is in Phase II development for the treatment of depressive disorders and is one of two compounds that Amarin has in preclinical development for Parkinson's disease. We are favorably impressed with Amarin's outlook, for several reasons we discuss. Although the current product pipeline will not begin to be commercialized before early 2008, in the interim we believe that there are likely to be several catalysts to spark increased investor interest.
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Corrected: Cryo-Cell Rating Speculative Buy In Initiating Coverage; Significantly Undervalued When Compared To ViaCell
William R. Prather, RPh, MD
July 25, 2006. We believe the common stock of Cryo-Cell International, Inc. (OTCBB: CCEL) is potentially a compelling investment, providing quality service in the growing, umbilical cord blood stem cell banking market. Additionally, we believe the value of Cryo-Cell is significantly undervalued when compared to ViaCell (Nasdaq: VIAC) whose subsidiary, ViaCord, represents almost the entire revenue for ViaCell and is considered by us to be a pure play along with Cryo-Cell in this industry. When the Company is able to prove to the investment community that they are able to capture their fair share of what we currently estimate to be a $350 million market, the market value of the Company should significantly appreciate.
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DXP Enterprises Reports Better Than Expected 2Q Results; EPS Estimates Raised; $50 Price Target and Strong Buy Rating Maintained
Paul J. Resnik, CFA
July 25, 2006. DXP Enterprises, Inc. (NASDAQ:DXPE) yesterday announced a doubling in net income to $2,950,000 for the second quarter ending June 30, 2006 with diluted earnings per share of $0.51 (our estimate had been $0.45) compared to net income of $1,477,000 and diluted earnings per share of $0.26 for the second quarter of 2005. Sales increased 53.5% to $69.8 million (our estimate was $67.3 million) from $45.5 million for the second quarter of 2005. Assuming continued strong revenue gains, a 27.5% gross margin, and 38.5% tax rate but a slight increase in SG&A as a percentage of sales to 20.1% to reflect Sarbanes-Oxley compliance expenditures, we are raising our EPS estimates for the 3Q from $0.47 to $0.52 (vs. a hurricane-depressed $0.18 last year), for the 4Q from $0.48 to $0.53 (vs. $0.36), and for the full year from $1.84 to $1.99 (vs. $0.94). Working off a higher base, we now estimate a 30% gain in EPS in 2007 to about $2.60 versus our previous expectation of 35% to about $2.50. In the current environment of rising interest rates and contracting market multiples, we are modestly adjusting the price/earnings multiple we are applying to DXP earnings from 20 to 19. On this basis, we are maintaining our 12-month price target of $50 for DXP shares and our Strong Buy rating.
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Elron Electronic Industries Ltd.: Price Decline, Middle East Conflict, Basic NAV Discount at 23%
Barry Raeburn
July 25, 2006. Elron (Nasdaq: ELRN) is not a company which has any near team earning risk and the long term prospects of its holding companies remains strong. We continue to believe that Elron shares present an attractive opportunity as the shares trade at a discount to net asset value (NAV). Elron public market valuation as of closing price on 7/24/06 was $271 million creating a discount of 23%.
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Quest Oil Delays Financial Statements: Avoid Pending Oli & Gas Audit
Richard R. Wolfe, CFA
July 25, 2006. Quest Oil Corp, (OTCBB: QOILE) in recent SEC filings, has delayed the filing of its annual report on Form 10-K and has indicated that it will amend its three most recent quarterly financial statements. In a related development, management recently hired new auditors for its financial statements for the year ended March 31, 2006. The Dutton rating of shares of QOILE (new ticker) continues to be "Avoid" pending the outcome of the financial and oil and gas reserves audits. The stock has traded at $0.10 per share or less since July 12, 2006.
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Telkonet Announced Sale of An iWire System to a Major Utility
Richard W. West, CFA
July 24, 2006. Talkonet, Inc. (Amex:TKO) announced on July 24, 2006 that after bringing to an early close a successful pilot project for substation automation and monitoring, the customer, a major utility, opted to take delivery of an iWire System to manage its energy data. Telkonet's common stock set a new low in a climatic selling day on July 18, 2006 and is slowly recovering. We reiterate our Strong Speculative Buy Rating and the $6.25 price target.
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Hydrogen Power International Completes Name Change And Trades Under New Symbol
Sally H. Wallick, CFA
July 23, 2006. As of July 21, 2006, Hydrogen Power International, Inc. (OTC: HYDP) began trading under the symbol HYDP on the Over the Counter Pink Sheets. Hydrogen Power International's wholly owned subsidiary, Hydrogen Power Inc. (HPI), has developed a patented hydrogen-production technology. We rate the Company's shares Neutral. From an investment standpoint, key differentiating characteristics of HPI's hydrogen-production process make us optimistic about its long-term opportunities for commercialization. At the same time, as a development-stage company with no revenue to date, Hydrogen Power International faces many execution, financial and competitive risks and challenges; visibility on the timeline for commercialization of its technology is limited, and we don't expect it to generate revenue from commercial applications before mid to late 2007. Therefore, we consider it appropriate for risk-oriented investors.
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Internet-Gold: Impact of the Lebanon Conflict
Rafael K. Kapelinski
July 21, 2006. Internet Gold's (Nasdaq: IGLD) share price has recently declined by almost 20% on the back of the escalation of the conflict in Lebanon. We believe that the impact of the conflict on the Company's 2Q 2006 results should already be slightly negative. We reiterate our Buy rating and maintain our forecast but we do believe that the further escalation in the conflict is bound to have a more far reaching negative impact on the Company's performance in 3Q 2006 and will warrant a downgrade of our numbers.
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XAAR: Updating the Forecast, Upgrade to Strong Buy
Rafael K. Kapelinski
July 21, 2006. We upgrade Xaar to Strong Buy as we believe that the current share price weakness has created a very attractive long-term opportunity. We downgreade our 2006 forecast following the disappointing trading udpate, but we believe that the market reaction has been overdone. Now we expect 2006 revenues and profit before tax of £48.9 million and £11.5 million respectively versus £51.2 million and £14.1 million previously. Given the downgraded forecast the shares are trading at 5.9x 2006E sales and 19.5x 2006E EBITDA. We establish a new price target of US$ 5.51.
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Forgent Announces Patent Litigation Information. Strong Speculative Buy Rating Reiterated
Richard W. West, CFA
July 20, 2006. July 20, 2006. Forgent™ Networks (Nasdaq: FORG) releases patent litigation information on the two ongoing patent litigations. Strong Speculative Buy Rating Reiterated.
Richard W. West, CFA
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Puda Neutral Rating In Update Coverage Due To Share Price Rise
Paul J. Resnik, CFA
July 19, 2006. Given the current trends in the Chinese economy, we believe realization per ton of coal is likely to remain at current levels and we expect Puda Coal Inc. (OTCBB: PUDC) will continue to operate at a gross margin of approximately 23% in 2006. While there may be pressure on profit margins on account of capacity expansion following the two plant acquisitions discussed later in this report, revenues are expected to continue expanding briskly. The Company anticipates revenue for the full year 2006 to be in the range of USD $120 million to USD$135 million, an increase of 132% to 161%, respectively, compared to the USD $51.7 million reported for 2005. We are assuming 2006 revenues of USD $127.5 million, the midpoint of management guidance, and fully diluted earnings per share (adjusted to exclude non-cash financing expense) of USD $0.11 (management guidance is $0.11). For 2007, we are assuming 20% revenue growth to USD $153 million, a continuation of a 23% gross margin and earnings per share of USD $0.14 (management guidance is USD $157.9 million in revenues, a 23.3% gross margin and earnings per share of USD $0.17). We are revising the basis for our 12-month price target to the 2007 projected earnings per share. A multiple of 25 times this projection results in a $3.50 price target, higher than our previous target of $2.40, which was based on a price/earnings multiple of 20 on our previous 2006 earnings per share estimate of $0.12. However, with the stock currently trading at $3.50, we are maintaining our Neutral rating on the stock.
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Smart & Final Buy Rating Maintained In Update Coverage; Optimistic That The Programs Management Has In Place Should Resuscitate The Top-Line Growth
Jonathan H. Ziegler, CFA
July 19, 2006. Smart & Final (NYSE: SMF) reported second quarter (12-week period ended June 18, 2006) results that were below our expectations. Perhaps we had been too optimistic regarding the pressure on margins from the aggressive new storing program. The Company reported EPS of $0.18 compared with $0.25 reported in the second quarter of last year. We had been estimating EPS of $0.27 per share. Comparable store sales were -0.03% compared with our estimate of +2.75%; there was a challenging comparison with the year ago quarter when comps were up 4.1%. While these results certainly did not make exciting reading, there were some causes for a more positive reading. The decline in EPS was impacted by the factors discussed in our report. The "adjusted" quarter, thus, would have been $0.29 per share. Thus, the EPS comparison was not as negative as it first appeared and we believe the above factors should either phase-out or improve over time. We are optimistic that the programs management has in place should resuscitate the top-line growth. Such growth should leverage the operating cost structure and boost margin. We also expect the "strategic alternatives" initiative to be a wild card that could conceivably have a positive outcome. With these issues in mind, in conjunction with the recent sell-off in the shares, we are maintaining our investment rating of Buy.
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Telanetix Strong Speculative Buy Rating In Initiating Coverage; Conferencing Products Of Very High Quality And Likely To Be Considered To Be A Generation Ahead Of Competitive Products
Joe Noel
July 19, 2006. In our opinion, Telanetix's (OTCBB: TNXI) conferencing products are of very high quality and are likely to be considered by many to be a generation ahead of competitive products. For more than 20 years, various parties, including telecommunications carriers, video conferencing equipment manufactures, industry and brokerage analysts, journalists, and others have espoused the benefits of video conferencing. We believe most currently available video conferencing systems are simply too difficult to use, offer unacceptable video resolution, are plagued by excessive propagation, and do not mimic real world corporate meeting environments. We are impressed by the conferencing systems developed by Telanetix Inc., of San Diego, California. The developmental stage Company, which we believe is quickly moving toward revenue generation, has developed a system that integrates audio, video and data from different locations in order to provide real-time communications between geographically separate locations. In many ways, we believe comparing this Company's products to the most popular currently available systems misses the point that this product design team was trying to make when they designed the product. We do not view this product as simply a video conference system, but rather a generational leap ahead from simple video conferencing. With the orientation toward delivering full size, face-to-face images of real-time meeting environments through the use of extremely high-resolution video with very little latency combined with high-quality audio and data transmission, we believe Telanetix's systems are significantly different from most other currently available video conferencing systems offered by industry leaders, such as U.S.-based Polycom, Inc and Norwegian-based Tandberg. We are estimating revenues for 2007 at just under $14 million. Based on this revenue generation, we are estimating Telanetix to breakeven or to generate modest positive earnings during the June quarter of 2007.
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Trinity Biotech Strong Buy Rating Maintained; Expected To Be "Transformational" For Trinity
Stephen L. Handley
July 19, 2006. Recently, on June 27, Trinity Biotech (NasdaqNM; TRIB) announced that it had concluded its largest acquisition to date, which, in management's words, is expected to be "transformational" for Trinity. The acquired diagnostic product line is expected to immediately be accretive to earnings, and in 2007 is projected to add $40 million to revenues and $5-$6 million to operating profits. Specifically, this relates to the acquisition of bioMerieux's coagulation business, which has been acquired for a total cash consideration of up to $51.9 million. Its coagulation instrument and reagent product lines have immediately increased Trinity's installed base of automated coagulation instruments from 1,000 to 3,000, and thereby moved the Company into fourth place in this market; specifically, this will increase its share of the worldwide coagulation market from 5% to about 13%. Management's stated objective is to compound revenues over the next few years at an average annual rate of 20%, through a combination of organic growth and acquisitions, and to increase operating margins from 7.9% in the recent quarter (before share-based payments) to over 12.0%. This targeted operating margin is expected to be achieved by early 2007.
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HydroGen Positioned To Benefit From Growing Demand For Clean Distributed Energy
Sally H. Wallick, CFA
July 19, 2006. HydroGen (OTCBB: HYDG) develops multi-megawatt hydrogen-powered fuel cell systems for power generation. Its technology is well developed and ready for commercialization and, as a result, we believe that the Company is well positioned to benefit from growing demand for clean distributed energy. A July 18 article in the Wall Street Journal notes that record breaking electricity consumption in many parts of the U.S. is underscoring the need for more generating and transmission capacity. One potential source of additional generating capacity is distributed energy, or decentralized, on-site generation and delivery of power. The benefits of distributed generation for electricity users and producers can be significant. Already distributed generation of electricity is an estimated $2 billion-$6 billion market in the U.S., and the Department of Energy projects that by 2010, it will account for 20% of new generating capacity and that by 2020, it will satisfy 23% of industrial electric demand. We rate HydroGen's shares Speculative Buy. The Company is discussed in detail in a Dutton Associates report dated May 9, 2006. We consider the shares appropriate for aggressive investors willing to accept the above-average risk inherent in an early-stage company that is not yet profitable.
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O2Diesel Regains Compliance with AMEX Listing Requirements
Sally H. Wallick, CFA
July 19, 2006. The American Stock Exchange (AMEX) notified O2Diesel that it has regained compliance with AMEX listing requirements. In December 2004, AMEX had informed O2Diesel that it was not in compliance with the exchange's listing standards, and in February 2005, AMEX accepted O2Diesel's plan to regain compliance and granted it an extension until June 16, 2006 to achieve that goal. We rate O2Diesel common Speculative Buy.
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Telkonet Comments On Stock Price, Current Business Status and Management's Activity.
Richard W. West, CFA
July 19, 2006. Telkonet, Inc. (Amex-TKO) in a July 19, 2006, press release, addresses rumors that have wieghed upon the price of its stock. Government copntract is in place, only delayed by red-tape, CEO has returned from medical leave and is involved in day-to-day management. We are raising rating to a Strong Speculative Buy and maintaining $6.25 price target.
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Ampex, Corporation to Apply for Listing on Nasdaq Capital Market
Richard W. West, CFA
July 18, 2006. Ampex, Corporation (NasdaqNM -AMPX) received a Nasdaq Staff Deficiency Letter indicating that the Company's market value and total assets had fallen below minimum levels ($50.0 Million) required for the continued listing of its Class A Common Shares on the Nasdaq Global Market based on Marketplace Rules 4450(b)(1)(A) and 4450(b)(1)(B). Ampex intends to apply for transferring its listing to the Nasdaq Capital Market (formerly the Nasdaq SmallCap Market). We view this as a non-event in the overall trading life of Ampex.
We reiterate our Strong Buy Rating.
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DXP Enterprises Shares Drop Sharply Before Earnings Report; Maintain Estimate of Over 70% Increase in Year-Over-Year 2Q EPS; Strong Buy Rating Reiterated
Paul J. Resnik, CFA
July 18, 2006. DXP Enterprises, Inc. (Nasdaq: DXPE) shares have dropped to their lowest level since March 1. At the current intraday price of $21.80 the shares are trading at 11.8 times our estimate of 2006 earnings per share of $1.84 (vs. $0.94) and only 8.7 times our 2007 EPS estimate of $2.50. We believe the weakness is the result of an overhanging shelf registration of one million shares, the breakdown through technical support levels, and general market weakness. The Company will be holding its regularly scheduled board meeting on July 24, and we anticipate that second quarter results will be announced that day. Our estimate is for revenues of $67.33 million and EPS of $0.45 versus revenues of $45.46 million and EPS of $0.26 in the year-earlier period. We reiterate our Strong Buy recommendation.
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Shumate to Develop High-End Product for Shell Affiliate; Raising Target Price To $2.83
Richard R. Wolfe, CFA
July 18, 2006. Shumate Industries (OTCBB: SHMT) announced a technology development agreement with At Balance Americas, LLC, a wholly owned subsidiary of Shell Technology Ventures, in which SHMT will develop a downhole isolation valve (DIV) using its patented Hemiwedge design. The agreement represents a milestone for SHMT, which, at the time of our initial report was still in the discussion stage with major oil companies regarding the development of high-end downhole (and also subsea) applications of the Hemiwedge technology. In response, we are raising our 12-month target price for SHMT shares to $2.83 from the initial $2.05 level.
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TeraForce: Termination of Coverage
David P. Soetebier, CFA
July 18, 2006. TeraForce (OTC: TERA) will no longer be covered by Dutton Associates due expiration of coverage period.
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Paulson Investment Co. Successfully Completes Second IPO Of The Year
Richard W. West, CFA
July 16, 2006. July 16, 2006. Paulson Investment Company wholly owned subsidiary of Paulson Capital Corporation (NasdaqNM: PLCC)announced completion of an IPO of Ascent Solar Technologies, Inc. (NasdaqNM-ASTIU-$5.25), a developer and manufacturer of state-of-the-art, thin-film flexible photovoltaic materials and modules. This is the second IPO completed by Paulson in FY2006. We reiterate our Strong Buy Rating
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International Barrier Technology Speculative Buy Rating Maintained; Increased Mfg Capacity Came Online In March - Up 600%
Gerald F. LaKarnafeaux, CFA
July 14, 2006. International Barrier Technology (OTCBB: IBTGF) produces and markets Pyrotite, a proprietary chemical formulation that has fire-retardant properties. The finished product is branded as Blazeguard®. Barrier has added significantly to its production capacity in recent months. A new line has been installed at the Company's facility in Watkins, Minnesota that will increase the Company's rated capacity from 8 million square feet to 50 million square feet. The new line began production on March 31, 2006. Demand for the Company's products is expected to increase in spite of what may be a softening in residential construction. Such a counter cyclical performance potential is explained by the low base of Barrier's surface capacity of 50 million square feet relative to the estimated 550 million square feet size of the multi-family construction panel and commercial modular building market. The Company reported record sales for the fourth fiscal quarter ending June 30, 2006. Sales increased by 71% to reach $1.83 million. Sales for the year were $6.61 million compared to $4.38 million in fiscal 2005. FY June 2007 sales are projected at $17.8 million with EPS of $.10.
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Evolution Petroleum Corporation, Formerly Natural Gas Systems, Announces Name Change; AMEX listing Pending.
Richard R. Wolfe, CFA
July 13, 2006. On July 13, 2006, Evolution Petroleum Corporation, formerly Natural Gas Systems, Inc. (OTC: NGSY) made public its new corporate name. The new name corresponds more closely to the oil and gas operations of the Company, which focus on redevelopment of crude oil resources as well as natural gas. We expect a new ticker to be assigned when the Company's shares begin trading on the AMEX, probably later this month.
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Maine & Maritimes Regulated Utility Receives Approval To Raise Rates
Sally H. Wallick, CFA
July 13, 2006. Maine & Maritimes' (AMEX: MAM) subsidiary Maine Public Service (MPS) received regulatory approval to raise total electricity delivery rates 3.84% or $1,327,150 effective July 15, 2006. In recent years, MPS has experienced cost increases outside of its control, including higher fuel, materials and supplies, insurance, health care and regulatory compliance costs. We reiterate out Speculative Buy rating on Maine & Maritimes common stock.
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21ST Century Files SEC Form 8-K Detailing Reinsurance Contracts With Private Reinsurers.
Richard W. West, CFA
July 12, 2006. Century Holding Company (Nasdaq-TCHC), filed an SEC Form 8-K detailing the private reinsurance coverage for FY2006. These treaties in conjunction with the reinsurance treaity with the State of Florida are quite substantial and appear to adequately hedge against hurricane losses for FY2006. 21st Century also acknowledged the 49% rate increase for homeowners policies that wentinto effect July 1, 2006. In view of these events, we are raising our rating to a Strong Buy and incresing our 12-month price target to $19.50 per share.
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Biophan Technologies Reports First -Quarter Results and Fundamental Accomplishments During The Quarter.
Richard W. West, CFA
July 12, 2006. July 12, 2006. Biophan Technologies, Inc. (OTCBB: BIPH)Reports First -Quarter Results and Accomplishments in areas of licensing and financing. We believe, recent downtrend in Biophan's common stock related more to general stock market rather than any internal negatives. We reiterate our Speculative Buy Rating.
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LJ International Raises Second Quarter Guidance
Sally H. Wallick, CFA
July 12, 2006. As expected, LJ International (nasdaq: JADE) raised second quarter guidance. New guidance includes 37% revenue growth and a doubling of diluted earnings per share year over year. Both the retail and wholesale businesses contributed to the quarter's better-than-expected results. Management also said that it is likely to provide full-year 2006 revenue and earnings guidance once there is additional information from the ENZO division and noted that recent results suggest that previously announced three-year financial targets appear to be achievable if not conservative. We have not had an opportunity to discuss the guidance changes with LJI's management. Preliminarily, we are raising our 2006 estimate for LJI from $0.25 per share to $0.28 per share and our 2007 diluted estimate from $0.33 per share to $0.34 per share. However, we will review these estimates again once we talk with management. We reiterate our Strong Speculative Buy rating on LJI's shares.
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Smart & Final: Reports Q2 Results Below Estimates; Higher Gas Prices May Be Causing Fewer People To Dine Out
Jonathan H. Ziegler, CFA
July 12, 2006. Smart & Final (NYSE: SMF) released its second quarter [12-week period] ended June 18, 2006 results yesterday after the close and held a conference call this morning. Same store sales of -0.3% for the quarter were disappointing. Sales weakness is largely in the Company's business customer base as opposed to the household customer. This data point confirms, to us, the concept that higher gas prices are causing fewer people to dine outside the home. At this juncture, no change in investment rating.
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Internet Gold Buy Rating and Price Target Maintained; Acquired 60% of Golden Lines
Rafael K. Kapelinski
July 11, 2006. Internet Gold (Nasdaq: IGLD) has acquired 60% of Golden Lines, a leading Israeli Internet service provider, for US$84 million, effectively valuing Golden Lines at US$140 million, which implies a P/Sales 2005 multiple of approximately 1.0x. This is the largest acquisition in the Company's history. We would like to argue that the acquisition is a slight positive, although it does increase the overall risk for the shareholders. Following the recent reorganization, Internet Gold has effectively become two companies, and the acquisition only completes the process. We believe that the market reaction to the sale price -- around 1.0x 2005 sales and 4.9x 2005 EBITDA -- is likely to be positive. It is important to remember that prior to the transaction Golden Lines was supposed to be floated on London's AIM, but foreign investors refused to grant the Company the market valuation of around US$170 - $210 million, while the Internet Gold transaction valued Golden Lines at US$140 million. Also, in our view, the value of the operating synergies between the two companies is significant. We reiterate our Buy rating and a price target of $8.00.
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Clearant Highlights Positive Surgeon Response to Clearant Process(R) At Recent Conference
Sally H. Wallick, CFA
July 11, 2006. Clearant (OTCBB: CLRI) took a high profile at the recent American Orthopedic Society for Sports Medicine Conference, including holding an educational symposium featuring several leading orthopedic surgeons. According to management, response to Clearant's message was positive, with more than 50 surgeons requesting further information about use of Clearant Process(R) sterile implants. We are encouraged by the surgeon response at the conference as this is one of the first concrete metrics indicating that the Company's strategy to communicate directly with orthopedic surgeons about the value of its sterilization process is gaining some traction. We rate Clearant common Speculative Buy for aggressive investors willing to accept the above-average risk inherent in an early-stage company that is not yet profitable.
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Maine & Maritimes Sells 50% Interest In Its Real Estate Subsidiary
Sally H. Wallick, CFA
July 11, 2006. Maine & Maritimes (AMEX: MAM) announced that it has issued a 50% ownership interest in its real estate subsidiary, Maricor Properties Ltd (MPL), to Ashford Investments Inc., a leading Atlantic Canadian real estate development, investment, and property management company. In 2005, MPL and Ashford formed a 50/50 joint venture, which became the development and redevelopment arm of MPL and manager of all of MPL's owned facilities. We do not know the financial details of the sale of half of MPL to Ashford, but as of March 24, 2006, Maine & Maritimes said that MPL had amassed real estate with appraised values of over $10.2 million (Canadian). We believe that this transaction strengthens Maine & Maritimes' relationship with Ashford and positions it to pursue additional real estate investment and development opportunities. We reiterate out Speculative Buy rating on Maine & Maritimes common stock.
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Xaar: 1H 2006 Trading Update, First Reaction.
Rafael K. Kapelinski
July 11, 2006. Xaar (LSE: XAR) has issued a preliminary trading update for 1H 2006. Revenues were £22.3 million (+12% year-on-year) versus our forecast of £ 24.5 million and the profit before tax was approximately £4.7 million (£6.51 million). All in all, the results are clearly lower than expected. Our recommendation and estimates are under review.
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Amaru: Initiating Coverage With A Neutral Rating; Ad-Sponsored, On-Demand And Personalized Broadband Media Experience.
Rafael K. Kapelinski
July 10, 2006. Anticipating the accelerating demand for personalized, on-demand broadband entertainment, over the last three years Amaru (OTCBB: AMRU), has established relationships with leading content providers in the United States and Asia and amassed rights to a wide variety of content libraries covering a range of lifestyles and interests for aggregation, distribution and syndication on broadband and other media, including rights for merchandising, product branding, promotion and publicity. Today what we consider the Company's most significant asset, its content library, is not included on the balance sheet. In our view, Amaru is well positioned to emerge as an important beneficiary from the accelerating shift in demand for ad-sponsored, on-demand and personalized broadband media experience. Most importantly, rather than providing the requisite infrastructure, the Company has positioned itself on the "application" layer. The ongoing migration of advertising to the Internet is another trend that Amaru should benefit from. We initiate with a Neutral rating. Currently the common shares are trading at P/Sales 06E of 6.9x, which in our view already anticipates significant value creation. In our view, the valuation over the next few quarters will be a function of the Company's execution on the IPTV strategy.
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Clearant: Update On Recent Developments
Sally H. Wallick, CFA
July 10, 2006. Clearant's (OTCBB: CLRI) share price has sold off in recent weeks. There has been no news from the Company to explain the pullback. We believe that Clearant continues to make progress on revenue-growth strategies. In particular, late in the second quarter, it began direct selling certain allografts treated with the CLEARANT PROCESS(R) to surgeons and hospitals in major markets. Also worth noting is Clearant's high profile at this year's American Orthopaedic Society for Sports Medicine Conference, where it held an educational symposium featuring several leading orthopedic surgeons with experience in using CLEARANT PROCESS-treated tissue implants. Our rating on the Company's shares remains Speculative Buy with a $3 share price.
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Maine & Maritimes Outside Directors Share Ownership Increases
Sally H. Wallick, CFA
July 10, 2006. A portion of Maine & Maritimes' (AMEX: MAM) outside directors' fees is paid in the Company's shares. We view this program positively since it provides these directors with a steadily growing equity interest in the Company. Maine & Maritimes Corporation is a holding company for Maine Public Service Company, a regulated electric transmission and distribution utility, and unregulated businesses. We reiterate out Speculative Buy rating on Maine & Maritimes common.
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Telkonet: Stock Below $3.00 Per Share Presents Investors With Buying Opportunity
Richard W. West, CFA
July 10, 2006. Telkonet, Inc. (AMEX-TKO)
Richard W. West, CFA
July 10, 2006. We detail reasons whe Telkonet's (AMEX: TKO) current stock weakness a buying opportunity. Increased business from Microwave Satellite Technologies, Inc (MST) and potential revenue from the sales of its proprietary high-speed power line communications (PLC) networking solution to U.S. Government and Multei-Dwelling Units not being recognized in the stock market. Among other reasons, stock is down because "selling begets selling." We reiterate our Speculative Buy Rating and the $6.25 price target.
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International Barrier Technology: Reports Record Fiscal Fourth Quarter Sales.
Gerald F. LaKarnafeaux, CFA
July 08, 2006. International Barrier Technology (OTCBB: IBTGF) reported record sales in the fourth quarter ending June 30, 2006. Sales of $1.83 million were up by 71% over last year's fourth quarter. Product volume in the quarter was 2.27 million sq.ft compared to 1.31 million sq.ft. shipped in the comparable quarter in fiscal 2005.. Based on an anticipated strong fundamental performance in fiscal 2007 the stock is undervalued and is probably reflecting weakness in housing and residential construction stocks. We maintain our $1.34 target price and speculative buy rating.
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LESCO Revises 2006 Outlook Lower; Rating Lowered from Buy to Neutral
Paul J. Resnik, CFA
July 07, 2006. LESCO, Inc. (Nasdaq: LSCO) yesterday announced that it has revised its expectations for financial results for the full year 2006. The Company reduced its guidance for revenue growth for its Stores Segment from 10%-12% to 5%-6% increased the rate of anticipated sales decline for its Direct Segment from 14%-15% to 34%-35%. Based on the revised revenue estimates and the related de-leveraging of gross profit, LESCO now expects to incur a net loss for 2006 on a consolidated basis, including a 39% tax benefit, of approximately $4 million.Since we commenced coverage of LESCO in March 2003, this has been a story of a Company seeking the right strategy to maximize profits. In addition to straight-forward cost-cutting efforts, there have been numerous major revisions in manufacturing, distribution and sales strategies. Along the way there have been a number of miscalculations followed by changes in direction. Recognizing that there has been a change in top management subsequent to the decision regarding direct sales, we are nonetheless particularly disappointed that the disbanding of the direct sales representative group was apparently done without consulting customers. The Company has promised to be less "inwardly focused" in the future.
This morning, the shares have dropped over 20% in response to the new guidance. Even at the current depressed share price, we believe that as it will be months, at least, before the level of success of the new direct sales initiative will be known. Accordingly, it is likely that the shares will show little movement from the current price of $12.00 in the near future and we are reducing our rating from Buy to Neutral.
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DXP Enterprises Rating Raised from Buy to Strong Buy Following Price Weakness; Company Announces Increased Credit Facility; Stock Added to Russell 3000
Paul J. Resnik, CFA
July 06, 2006. DXP Enterprises Inc.'s (Nasdaq: DXPE) shares have been declined almost 50% from their May 10th high. The registration of 1 million shares to be sold "from time to time," the decline through technical support levels, and an increase in shorting may have been factors in this weakness. Our current EPS estimates for the full years 2006 and 2007 are $1.84 (versus $0.94 in 2005) and $2.50, respectively. We continue to base our 12-month price target for the stock on a 20 price/earnings multiple of 2007 earnings so that our target is $50. As Dutton Associates rates shares with projected upside of over 40% as strong buys, we are responding to DXP shares' weakness by raising our rating from Buy to Strong Buy.
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Electric City Announces Financing, Completion of Parke Acquisition and Rights Offer; Cleans Up Balance Sheet Raising Rating to Speculative Buy
Richard W. West, CFA
July 06, 2006. Electric City Corp. (OTCBB:ELCY) annonces the completion of major capital structure changes, acquisition of Parke P.A.N.D.A. Balance sheet cleaned up, now no debt or preferred stock and ends up with$9.0 million in additional working captial. Electric City now free to go about its business of selling and marketing its proven energy savings solution. Rating raised to Speculative Buy with $1.60 12-month price target.
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Forgent Networks Licenses Apple Computer For Their '672 Patent.
Richard W. West, CFA
July 05, 2006. Forgent Networks Inc. (Nasdaq:FORG) and their subsidiary Compression Labs setted with and dismisses Apple Computer from the '672 Patent litigation. Even though court filings came after Judge Fogel's Markman Hearing ruling, the license was negotiatied after the Markman Hearing and before the Judge Fogel's ruling on June 29.
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Oragenics Receives $600,000 from Exercised Warrants
Wayne M. Lottinville, CFA
July 05, 2006. Oragenics, Inc. (AMEX: ONI) today announced that recently exercised stock warrants brought $600,000 into the Company. With this, the Company ended the quarter with more cash than it had at the end of 1Q06, and it now has sufficient funding for the majority of 2006. This financing will provide funding for Oragenics current development programs. With the exercise of these warrants, approximately 3.5 million warrants from the recent financing rounds remain unexercised, representing potential proceeds to Oragenics of about $2.1 million.
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Global Alumina Remains On Track In The Development Of Sangaredi Alumina Refinery
Les W. Childress
July 03, 2006. Global Alulmina Corporation (TSE:GLA.U) has indicated the development time line remains on track for the Sangaredi Alumina refinery in Guinea, West Africa.
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Internet Gold: Acquisition of Golden Lines, Reiterate Buy
Rafael K. Kapelinski
July 03, 2006. Internet Gold (Nasdaq; IGLD) has acquired a privately held Golden Lines, a leading full-suite telecommunications service provider in Israel that offers broadband, local telephony, international telephony and data services. The acquisition is subject to the regulatory approval, which we expect should be forthcoming within a month or so. In our view, on balance the acquisition is a long-term positive, although is bound to increase the operating risk in the short term. Our estimates are under review. The available inforamtion on the transaction is still sketchy. We will publish a comprehensive analysis of the acquisition shortly.
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Panhandle Royalty Now Ranked on FORTUNE Small Business List
Les W. Childress
July 03, 2006. Panhandle Royalty Company (ASE:PHX) was ranked number 12 on the annual FORTUNE small business list of the fastest growing small companies in America.
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Seabridge Insider Share Sales Are Benign To Investors
Les W. Childress
July 03, 2006. Seabridge Gold, Inc. (ASE: SA) announced that Chairman Jim Anthony and President and CEO Rudi Fronk recently sold a total of 347,000 in a single transaction in order to meet tax obligations incurred as a result of stock option exercises that were due to expire.
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Shumate Common Stock Offer Now Effective
Richard R. Wolfe, CFA
July 03, 2006. On June 30, 2006, an SEC Notice of Effectiveness was posted with regard to Shumate Industries' (OTCBB: SHMT) common stock registration statement on Form SB-2, making over ten million additional outstanding shares now available for public trading. This represents approximately 65% of outstanding SHMT shares, and, in light of our Strong Speculative Buy rating on the stock, we regard the added liquidity as a favorable development.
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Neoprobe Neutral Rating Maintained; Remain Enamored by Lymphoseek and RIGS®; Anticipate Raising Our Investment Rating On The Common Stock On Regulatory Milestones Achieved
William R. Prather, RPh, MD
June 30, 2006. We believe Neoprobe's (OTCBB: NEOP) market value responds to milestone announcements. Our estimates of milestone timelines (see report table 1, page 7) suggest that the Company will have a paucity of announcements over the next year and has, therefore, prompted our maintaining an investment rating of Neutral. However, we do believe Neoprobe will be able to achieve an important milestone that we predicted would occur in Q3-06 with the initiation of Phase 2 trials for Lymphoseek™, a product that we believe could produce significant revenues for Neoprobe if successfully commercialized. We remain enamored by Lymphoseek and RIGS® and anticipate raising our investment rating on the common stock of the Company if and when they are able to advance these technologies further along in the regulatory process. Conversely, we also believe the Company's revenue-producing product portfolio in gamma radiation-detection devices and the Quantix™ line of blood flow monitors do not contain blockbuster revenue potential and Neoprobe's CIRA Biosciences subsidiary is continuing to have difficulty raising capital.
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Natural Gas Systems: Details of $50 Million Denbury Resources Transaction and Approval of AMEX Listing.
Richard R. Wolfe, CFA
June 30, 2006. Natural Gas Systems, Inc. (OTCBB: NGSY). In a June 28, 2006 current report filing, Natural Gas Systems discussed the disposition and potential tax treatment of the $50-million gross proceeds from the sale of its Delhi Unit to Denbury Resources Inc. The Company has also received approval for an American Stock Exchange listing. We continue to regard the Denbury transaction as a very significant positive step for Natural Gas Systems.
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Forgent Receives Judge Fogel Ruling on Markman Hearing - Market Reaction Negative - Stock Down Sharply on Huge Volume
Richard W. West, CFA
June 29, 2006. Forgent Networkes (Nasdaq:FORG) stock reacts sharply to ruling on the '672 Patent litigation from March 9th Markman Hearing. Ruling appears to favor defendants. Question concerns whether or not the '672 Patent applies to single frames or multiple frames ie, video data. We believe stock reaction is overdone and detail our reasoning for rating of Strong Speculative Buy - Price target reduced to
$3.00.
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Internet Gold (Nasdaq: IGLD): Reiterate Buy Rating, Company on Track to Meet Our 2Q 2006 Forecast
Rafael K. Kapelinski
June 29, 2006. Following the stronger-than-expected 1Q 2006 results, we expect equally strong results from the Company in 2Q 2006E (revenues of USD$ 21.7 million and EPS of USD$ 0.09). In fact, we believe that our EPS forecast appears a little conservative given the progress of the Company's streamlining measures.
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LJI International: Updates Retail Expansion, Anticipates Higher 2Q Guidance.
Sally H. Wallick, CFA
June 29, 2006. LJI International Inc. (NasdaqNM: JADE) provided an update on the rapid expansion of its ENZO retail jewelry chain, saying that ENZO's expansion is ahead of schedule and that it appears to be on track to meet or beat growth and profitability targets. LJI also noted that it looks for better-than-expected performance by its wholesale and retail businesses to result in an increase in second quarter guidance. We reiterate our Strong Speculative Buy rating on LJI's shares.
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Wall Street Journal Article Discusses Developments in Cellulosic Ethanol
Paul J. Resnik, CFA
June 29, 2006. Today's Wall Street Journal discussed developments occurring in the ethanol field in a front page article. We found this article, entitled "Big Players Join Race to Put Farm Waste Into Your Gas Tank," had much to recommend it. We continue to believe that there are opportunities for substantial profits in this sector as growing, and more efficient, production is met with growing demand. Our rating on Pacific Ethanol (Nasdaq: PEIX) remains a Strong Speculative Buy.
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Pipeline (PPDA) Issuance of $37 mn of Convertible Notes Validates Business Strategy; Strong Buy
David Riedel
June 29, 2006. Pipeline (OTCBB: PPDA) Credit card processing company Pipeline has raised $37 mn in a convertible note issue. Funds will be used to refinance more expensive debt as well as provide capital for acquisitions. We consider this a validation of the Pipeline business strategy and reiterate our Strong Buy rating and $2.00 price target.
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Woize International (WOIZ.OB): Aditional COlor on the Metro Deal, Reiterating Speculative Buy Rating and Price Target of USD 1.0.
Rafael K. Kapelinski
June 29, 2006. Last week Woize International Ltd. announced the roll out of its first branding partnership with the most widely read morning paper of Sweden, Metro. As Metro launches its online news portal, it includes offering its readers all the benefits of the Woize® digital communication services, now branded as a Metro service. In our view, as we have stated in our initiation report, the Company's branding strategy should increasingly emerge as an important value driver. After talking to the Company's management, we have some additional color on the Metro deal, which has been operational for a week now.
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NutraCea Maintained At Strong Buy Rating; 2006 To See Supplying Low Cost, Nutrient Dense, High Margin Stabilized Rice Bran Based Product To Impoverished Third World Consumers
Gerald F. LaKarnafeaux, CFA
June 28, 2006. On October 4, 2005, the merger of NutraCea (OTCBB: NTRZ) and RiceX was completed. The benefits of the merger to NutraCea are substantial. Specifically, the financial position of NutraCea has been strengthened as a result of the elimination of $2.4 million of debt and an infusion of $7.85 million of cash that exceeded the requirements of the merger agreement by $2.4 million. The Company reported excellent fourth quarter 2005 and first quarter 2006 operating results. It is anticipated that 2007 sales and income results will be substantially above 2006. Production capacity constraints are being resolved with a supply agreement in the first 2006 quarter, the expansion of existing facilities in the second half of 2006 and new construction that is planned for 2007. There has been progress in the development of international food programs that may provide profitable sales beginning in the second half of 2006. The Company will be supplying low cost, nutrient dense, high margin stabilized rice bran based product to impoverished third world consumers, particularly school children. On May 15, 2006, the Company announced a $17.56 million private placement of Series C convertible preferred stock, which should provide the capital required to meet its business plan.
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XAR Plc: Reiterating Buy Rating With Implied 33% Return As Company Becomes Possible Acquisition Canidate After Competitor Bought By Fuji Photo Film
Rafael K. Kapelinski
June 28, 2006. We reiterate our Buy rating for Xaar Plc (LSE: XAR) and price target of USD $6.15 (unchanged at £3.50), which implies 33% upside from the current levels. The Company's share price has fallen in the last few weeks because of the concern about the valuation and pricing pressure in the Asian markets. We remain bullish on the stock, as we believe that Xaar's valuation is not overly aggressive and the Company is increasingly becoming an attractive acquisition target. In the recent months we have seen a number of acquisitions in the digital imaging market. Most recently, on June 13, 2006, Fuji Photo Film (Fuji) purchased Dimatix, a privately held leading developer and manufacturer of piezo inkjet printheads, precision micropumps and specialized print systems. Dimatix has been Xaar's primary competitor. The transaction is scheduled to close in July 2006. We discuss the pro and cons for Xaar of this acquisition. In our view, both Agfa and HP should be interested in Xaar's technology. The former has already collaborated with the Company, while the latter needs piezo inkjet expertise to complement its in-house thermal inkjet technology.
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Pacific Ethanol Strong Speculative Buy Rating Reiterated; Ethanol Industry Outlook Reviewed
Paul J. Resnik, CFA
June 28, 2006. Investors have become increasingly concerned about corn prices going up and ethanol prices going down in 2007. Our take on the current situation is as follows: 1) U.S. ethanol capacity will grow rapidly to 7 billion gallons by year-end 2007 and to over 8 billion gallons, perhaps approaching 9 billion gallons by year-end 2008. Many plants on the drawing board will stay there; 2) The Renewable Fuels Standard mandate which targets 7.5 billion gallons by 2012 will be revised higher in legislation later this year or early next but will still serve as a floor instead of as a target; 3) As long as crude oil is priced above $50/barrel the gasoline refiners will buy all the ethanol they can get around $2.00/gallon; 4) Corn prices will be firm but will not go much above $3.00/bushel on a sustained basis as additional acreage, increased yields and shifts from price sensitive export markets will provide adequate supplies until alternative feedstocks and technologies come into play; and 5) Companies with good sites, strong finances and solid engineering/construction firm relationships will get their plants built and achieve very attractive returns. On this basis, we reiterate our Strong Speculative Buy rating on Pacific Ethanol (Nasdaq: PEIX).
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Pharmos: Updating Our Rating View;
William R. Prather, RPh, MD
June 28, 2006. In our Pharmos (Nasdaq: PARS) Update Report dated June 23, 2006 we reduced our investment rating from Strong Speculative Buy to Neutral as the ensuing proxy fight has created a significant amount of uncertainty about the future makeup of the Company's management and corporate strategy. By way of clarification, we would like to make it understood that if the current management wins the proxy fight and continues to move forward with its plans for the Company, including the acquisition, we are likely to reestablish a positive opinion on the shares.
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A.P. Pharma Maintained At Strong Speculative Buy Rating; Phase III Began In April
Stephen L. Handley
June 27, 2006. A.P. Pharma (Nasdaq: APPA) is a small, specialty pharmaceutical company seeking to develop and commercialize products utilizing its proprietary polymer-based delivery systems. Its primary focus is on bioerodible systems, either injectable or implantable, that incorporate its proprietary Biochronomer™ technology. We recently visited with management at the Company's headquarters in Redwood City, California, and reviewed in considerable detail the clinical data and ongoing development plans for the product APF530. Recall that this compound is being developed for the prevention of acute and delayed chemotherapy-induced nausea and vomiting (CINV), and virtually all of the Company's resources are now being dedicated to clinical trials and regulatory documentation necessary for its commercialization. Rights to future royalties on sales of two licensed products were sold in January for up to $30 million. This will enable A.P. Pharma to completely fund the pivotal Phase III clinical trials of APF530, which began in late April, even if a suitable agreement is not obtained during this period with a development and marketing partner. Management is clearly pursuing a higher risk/higher reward strategy, and we believe that this is the correct move because we judge that the risk of not eventually achieving commercialization of APF530 is very low, while the probability of this compound ultimately achieving great commercial success is quite high.
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On Track Innovations Reiterated Buy Rating; Only Integrated Contactless Smart Card Provider
Rafael K. Kapelinski
June 27, 2006. In our view, OTIV (Nasdaq: OTIV) remains in a truly unique position to take advantage of the accelerating switch to contactless microprocessor-based smart card solutions. OTI has worked with the largest issuers of contactless cards -- MasterCard, Visa and Amex -- providing them with the comprehensive contactless solution expertise, including the OS (Operating System), application support and inlay technology. As a result, the Company shipped approximately 10 million card solutions to the U.S. in 2005, becoming one of the market leaders. What makes the Company truly unique is that OTI is the only integrated contactless smart card provider that offers complete plug and play solutions for a number of specific vertical markets. In our view, OTI's greatest competitive advantage lies in the Company's proven expertise across the entire value chain. We re-initiate coverage on On Track Innovations (OTI) with a Buy rating and a price target of $14.00.
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TMFS Holding Strong Speculative Buy Rating Maintained
Richard W. West, CFA
June 27, 2006. While the past growth in TMSF Holdings' (OTCBB: TMFZ) total loan income and gross profits is impressive, the slowing of growth in the income from operations and net income demonstrates the affect that the increased interest rates and the flattening of the yield curve has on the earnings of a company whose income is dependent upon the revenue created from originating and selling mortgages. TMSF Holdings' proposed change in its business plan to become a REIT is a step in the direction of solving this situation. However, we again note there are many events that must occur before TMSF Holdings completes the transition to the REIT status, with the most crucial being the raising of sufficient capital to allow TMSF Holdings to meet the requirements to become an REIT. The timing of the reorganization into a REIT is completely dependent upon the raising of additional capital. Management has noted in its SEC filings that it is planning to raise approximately $80.0 million in new capital. Based on our estimated diluted EPS of $0.29 for 2006, and applying a price earnings ratio of 6.0, we are lowering our 12-month price target of $1.75 per share. We believe that at the current levels, TMSF Holdings affords investors an opportunity for long-term capital growth with minimal downside risk. Given the past successes of TMSF Holdings' management, we believe a timely transition will bring another level of success to TMSF Holdings' shareholders. We maintain our Strong Speculative Buy rating.
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Touchstone Applied Sciences Rating Maintained At Strong Buy
Sally H. Wallick, CFA
June 27, 2006. TASA's (OTCBB: TASA) second quarter results were mixed. The good news was a robust 46% year-over-year revenue increase to $3.5 million, which was well ahead of our estimate of 30% revenue growth to $3.1 million. On the other hand, expenses were higher than projected, resulting in a quarterly loss of $0.09 per share, well below last year's $0.04 per share profit and our estimate of break-even results. Management cited higher expenses related to large contract startup costs to explain the increase in costs. Looking forward, a key issue for revenue and earnings will be the Company's June 1, 2006 purchase of Questar Educational Systems, Inc., a leading provider of test delivery, scoring and score analysis services to state programs. We view the combination of Touchstone and Questar as mutually beneficial since Questar's operational strengths complement Touchstone's development capabilities. Fiscal 2005 pro forma revenue for the combined Company would have been approximately $36 million (versus Touchstone's reported fiscal 2005 revenue of $11.7 million) and its post-acquisition booked backlog of orders totals about $100 million through 2010. Including Questar as of June 1, 2006, we project fiscal 2006 and 2007 earnings for Touchstone of $0.25 and $0.43 per share, respectively (up from $0.16 and $0.24 per share, respectively, prior to the acquisition). We view the Questar acquisition as a culmination of Touchstone's strategies in recent years aimed at broadening its spectrum of products and services, growing revenue, gaining market share and strengthening management.
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American Software, Inc. (AMSWA) Reports Strong Financial Results for its Q4 and Full FY Ended April 30, 2006
David P. Soetebier, CFA
June 27, 2006. American Software, Inc. (Nasdaq: AMSWA) reported strong financial results for its fiscal fourth quarter and full year for the period ended April 30, 2006. Total revenues at $76.6 million for the full year were slightly above our forecast of $75.4 million. Our fully diluted earnings per share estimate for fiscal 2006 was $0.22 versus the $0.21 actually reported. Strength at Logility led the financial gains for the quarter and the year. Our fiscal 2007 revenue estimate for American software remains $81.0 million and earnings per share estimate (fully diluted) remains $0.25. The shares are rated Buy with a target of $8.00.
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Chembio Rapid HIV Tests Poised for Commercial Success
Stephen L. Handley
June 27, 2006. Chembio (OTCBB: CEMI) announced on Monday June 26 that has received an order from the procurement agent on behalf of the U.S. CDC office in Nigeria for 200,000 HIV STAT-PAK™ rapid tests; we estimate that the value of this order exceeds $200,000. The Nigerian Ministry of Health has designated Chembio's diagnostic as a screening test in four out of the eight testing protocols that comprise Nigeria's Interim National Testing Algorithm. Within the U.S., Chembio received FDA approval for its rapid HIV tests on May 30th. We continue to rate the stock a Strong Speculative Buy, with a 12- month price target of $1.50 per share.
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MorphoSys Expanding Collaboration with Novartis
Stephen L. Handley
June 26, 2006. MorphoSys (XETRA: MOR.DE) announced a significant expansion of its existing therapeutic antibody collaboration with Novartis, and this encourages us to reiterate our Strong Speculative Buy rating. Reflecting this expanded collaboration, management will be reviewing its previously stated guidance for 2006 and will provide an update no later than during the July 28th presentation of its Q2 results.
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Touchstone names Chief Financial Officer
Sally H. Wallick, CFA
June 26, 2006. Touchstone Applied Science Associates (OTCBB: TASA) named James Williams Vice President and Chief Financial Officer (CFO). Mr. Williams, who has extensive management, operational and financial experience, appears to be well qualified to fill this role. He succeeds Andy Simon, the Company's President and Chief Executive Officer, as CFO, which should free Mr. Simon to devote more of his time to strategic issues. We reiterate our Strong Buy rating on Touchstone's shares.
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Aurora Oil & Gas Raised To Strong Buy Rating;Robust Growth Via Systematic Development Of Low-Risk, Unconventional Natural Gas Resources
Richard R. Wolfe, CFA
June 23, 2006. We continue to look for substantial growth from Aurora Oil & Gas Corp. (AMEX: AOG), both in terms of natural gas reserves and operating cash flow. Developments since our previous update report (January 25, 2006) have further enhanced the Company's prospects. Results from the quarter ended March 31, 2006, although falling short of our projections, exhibit strong growth and are indicative of continued progress in oil and gas operations. Aurora has once again added to its ownership interests in the Michigan Antrim Shale and Indiana New Albany Shale plays. Although we have lowered our near-term earnings and cash flow estimates, we continue to see strong growth in the Company's future and view the near-term changes as related only to the timing of growth over the next few quarters. Aurora is well positioned for robust growth via systematic development of low-risk, unconventional natural gas resources in Michigan and Indiana. Compared to our January update report, our production model now reflects the last few months' major expansion of the Company's net acreage position.
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National Coal Raised To Strong Speculative Buy Rating
Richard R. Wolfe, CFA
June 23, 2006. National Coal Corporation (Nasdaq: NCOC) encountered some delays and reversals in recent months, which have had an adverse impact on first-quarter results and are also expected to affect the Company's second quarter performance; however, we believe the Company is now better positioned for long-term growth of earnings and cash flow. We have updated our earnings and cash flow model to reflect recent operational improvements, and the results point toward a strengthening of growth over the longer term; consequently, we have increased our estimates for 2007 and subsequent years. In 2007 and 2008, we believe that accelerated production growth should continue, as the Company adds roughly one new mine each quarter. We forecast 2007 production at 3.3 million tons (a 65% increase compared to an estimated 2.0 million tons in 2006 and 1.2 million tons in 2005, also a 65% increase), and in 2008 our production forecast is 4.6 million tons, a 40% increase. Our price assumptions for coal are flat, and under these circumstances cash flow is expected to surge, approaching $32 million in 2007 and $48 million in 2008. EBITDA growth exhibits a similar surge and EPS is estimated at $0.55 per share in 2007 and $1.25 per share in 2008 (representing the Company's first two years with accounting profits).
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NTII: Strong Speculative Buy Rating Maintained; Phase III Clinical Trials For Viprinex
William R. Prather, RPh, MD
June 23, 2006. We believe the recent departure of Neurobiological Technologies' Nasdaq: (NTII) CFO and the resultant decline of the market value represents an excellent opportunity for investors to accumulate shares in the Company. In our opinion, the fundamental reasons for recommending an investment in NTI have not changed. These include: 1) the blockbuster potential for Viprinex™ in acute ischemic stroke, 2) a growing annuity from Memantine, and 3) a stellar, experienced chief executive officer and management team. Additionally, NTI has consistently met or exceeded our milestone expectations, something most biotechnology companies we cover are not able to achieve. The launch of Phase III clinical trials for Viprinex, the over 60% annual growth in royalties from Memantine and, in our opinion, Paul Freiman and other management members hitting a home run with the sale of XERECEPT™, underscore why we believe NTI is a quality biotechnology company. We also believe that if Viprinex is successful, a market capitalization for NTI in the $0.5 billion range is reasonable. We are reiterating our investment rating on the shares of the Company as a Strong Speculative Buy with a price target of $8.00.
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PARS: Lowering To Neutral Rating As Proxy Fight To Define Future
William R. Prather, RPh, MD
June 23, 2006. On June 13, 2006 Pharmos Corporation (Nasdaq: PARS) announced the mailing of a letter, the contents of which were incorporated into the press release, to shareholders urging them to support the acquisition of Vela Pharmaceuticals, Inc. (VelaPharm). Shareholders have now received this letter and two preliminary proxies. One proxy is from current management dated June 16, 2006 advocating to vote for the issuance of up to approximately 19.5 million shares (and representing a potential dilution of over 100% to existing shareholders) for the acquisition of VelaPharm. The other proxy, dated May 25, 2006, is from dissenting shareholders who advocate voting against the acquisition and to replace three members of the existing Board of Directors with individuals representing their dissenting group. All of this translates into a proxy fight. Additionally, on May 19, 2006, Pharmos announced it had retained Burrill & Company, a life sciences merchant bank headquartered in San Francisco. Burrill will explore out-licensing opportunities for Pharmos and we believe none of the Company's assets are immune from potentially being out-licensed, including product candidates in VelaPharm's portfolio, should the acquisition be successful. With Pharmos' market value being approximately equal to its working capital of about $40 million, we believe the investment community is correctly suggesting investors stay on the sidelines until the Company figures out who they are, what they are and who is running the Company.
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Sky Petroleum Maintained At Strong Speculative Buy Rating; Substantial Progress In Its Two-Well Initial Drilling Program In The Mubarek Field
Richard R. Wolfe, CFA
June 23, 2006. Since our initial report of November 17, 2005, Sky Petroleum Inc. (OTCBB: SKPI) has evidenced substantial progress in its two-well initial drilling program in the Mubarek Field offshore the United Arab Emirates (UAE), where the Company is party to an international oil and gas participation agreement. Drilling of the first of two fully paid-for development wells has been concluded by Crescent Petroleum Company International Limited (Crescent), the operator of the Mubarek Field, and at last report (June 21) Crescent was engaged in well monitoring and control efforts aimed at boosting lower-than-expected initial flow rates. At the close of the first quarter, the Company held approximately $7.5 million in cash and liquid investments after satisfying the last of its required payments for the two-well initial Mubarek program. Funding should be more than sufficient for working capital needs and to begin a planned exploration program in the vicinity of Sir Abu Nu'Ayr Island, where Sky's participation agreement gives it the right of first refusal on a second oil and gas concession held by Crescent for exploratory purposes.
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Aurora Oil & Gas Taps Huff as Chief Financial Officer
Richard R. Wolfe, CFA
June 23, 2006. On June 22, 2006, Aurora Oil & Gas Corporation (AMEXL AOG), announced the appointment of Ronald E. Huff as Chief Financial Officer, a move that bolsters the management team by bringing in an executive with more than twenty years of experience in the leadership of similar independent oil and gas companies and is a vote of confidence in the Company's strategy of developing shale gas resources in Michigan and Indiana. We reaffirm our STRONG BUY rating and $8.23 target price on shares of Aurora Oil & Gas Corp.
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MXC: Unrated With Major Change In Business Strategy
Les W. Childress
June 22, 2006. Mexco Energy (AMEX: MXC) is in the process of a major change in strategy, which, among other elements, will include a change in some of the consulting relationships upon which the former operating strategy depended. In previous research reports, updates and notes, we referred to Mexco's strategy as one that was relatively passive. It centered on opportunities presented by outside consultants who located unexploited opportunities in mature producing oil and gas fields and often focused on reentry of existing wells where zones further up the hole had not been exploited. However, the number of attractive situations, which will require higher working interests on Mexco's part, have increased precipitously. Consequently Mexco has adopted a change in strategy, the details of which will be mentioned with the release of the fiscal year report and which we will highlight in our larger report to be released soon thereafter. Mexco anticipates release of fiscal year-end data before the end of June.
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Joystar Announces New Incentives For Experienced Agents. Agent Count Up Near 4,000 Strong Speculative Buy Rating Reiterated
Richard W. West, CFA
June 22, 2006. Joystar adds no fee program for experienced professional agents. Agent count at record high. High level of bookings projected to continue for balance of FY2006.
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Additional Gold Zones Found North of FAT Deposit at Courageous Lake
Les W. Childress
June 22, 2006. Core hole drill results from this past winter's program at Seabridge Gold's 100%-owned Courageous Lake project in Northwest Territories, Canada, found a new area of gold mineralization. Mineralization in the area drilled is similar to zones from past producing mines that are found four and nine kilometers, respectively, south of the FAT deposit. The balance of the drill program will be completed this summer. Our Strong Buy rating and price target for Seabridge are affirmed.
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LJ International books record orders at Las Vegas show.
Sally H. Wallick, CFA
June 20, 2006. LJ International booked a record $22 million of new orders at the JCK Show, up from $20 million in 2005, $17 million in 2004, and $15 million in 2003. Management was pleased with the response to new diamond and gold lines launched at this year's show. We believe that the company's strong performance at the JCK Show reflects continued robust demand at its wholesale business, which reported impressive 31% year over year revenue growth in the first quarter. We reiterate our Strong Speculative Buy rating on the Company's shares.
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Minrad: Expansion of Distribution Agreement With RxElite
William R. Prather, RPh, MD
June 20, 2006. Minrad International (AMEX: BUF) announced an amendment to the distribution contract that the Company has with RxElite Holdings, Minrad's US distribution partner for its generic inhalation anestheticsWe are making no adjustments in our current revenue or earnings estimates for Minrad. We believe the Company is capable of generating revenues and earnings of approximately $21M and $0.02 respectively for 2006. However, we expect huge growth in 2007 as the Company's sales and marketing efforts bear fruit and believe Minrad can post revenues and earnings of $72M and $0.49 respectively in this year. We are continuing to rate the common stock of Minrad a Strong Buy with a 12 month price target of $5.85..
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Seabridge Moving Forward on Kerr-Sulphurets
Les W. Childress
June 20, 2006. Recently Seabridge Gold, Inc. announced it will fund a 7500-meter core drill program for its 100%-owned Kerr-Sulphurets project in British Columbia and was moving ahead on a drilling program set for this summer. In our brief visit following the announcement, Seabridge management indicated no change in their view that the project may contain up to 5.0 million ounces of gold. Our rating on the stock remains Strong Buy.
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LJ International Maintained At Strong Speculative Buy Rating; Vertically Integrated, Extensive Product Line, Diversified Customer Base While Its Expansion Into The Retail Jewelry Business In China Represents An Exceptional Growth Opportunity
Sally H. Wallick, CFA
June 19, 2006. Hong Kong-based LJ International, Inc. (Nasdaq: JADE) designs, manufactures, distributes and markets a full range of fine jewelry. In addition, it operates a rapidly growing chain of retail jewelry stores in China. We reiterate our Strong Speculative Buy rating on LJI's shares, based on what we view as the Company's above-average long-term revenue and earnings growth prospects. We believe that LJI's vertically integrated structure, extensive product line, and diversified customer base provide significant competitive advantages, while its expansion into the retail jewelry business in china represents an exceptional growth opportunity with the potential to contribute substantial incremental revenue and earnings long-term. LJI's first quarter revenue increased 39% year over year to $24.2 million, while diluted earnings were flat year over year at $0.02 per share. Revenue growth, gross margin expansion and expense leverage contributed to a 29% increase in net income year over year, but a higher diluted share count resulted in diluted earnings per share even with year-ago results. We continue to project full-year 2006 diluted earnings for LJI of $0.25 per share. In 2007, when we expect the ENZO division to turn profitable, we project earnings of $0.33 per share.
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Midway Gold: Drill Results Support Expansion of Spring Valley Deposit
Mike Niehuser
June 19, 2006. Midway Gold Corp. (TSX Venture: MDW) announced drill results at its Spring Valley Project in Nevada. The most significant results were assayed at 4.7 grams/t gold over a 43 meter interval from 282 to 328 meters (including 1.5 meters at 92.9 grams/t). The hole was lost due to drilling difficulties at a depth of 328 meters ending in mineralization. A drill rig will be moved to the site to test below the intercept. The company is also awaiting assays on five holes drilled in the highly prospective West Diatreme and Deep Porphyry targets.
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Telkonet Inc.'s (AMEX-TKO) iWire System Installed Aboard Queen Mary; A quick, cost efficient, unique installation; Speculative Buy Rating Reiterated
Richard W. West, CFA
June 19, 2006. Telkonet's iWire System™ is becoming the system of choice Internet access for older venues that can not be disturbed by conventional wiring and drilling through walls. The relatively low cost and speed which the system can be installed is a major selling point for Telkonet. The hgh profile venue of the Queen Mary is a major marketing positve.
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Paulson Investment Company Announces Successfull Completion of IPO; Strong Buy Rating Reiterated
Richard W. West, CFA
June 18, 2006. The window of opportunity for corporate finance is open! Having completed its first IPO of FY2006, Paulson Investment Co. is planning on additional deals over the remaining quarters of FY2006. Paulson Capital's fortunes are somewhat dependent upon deals and the improved environment is encouraging for near term revenue and earnings.
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TMSF Holdings, Inc (OTCBB: TMFZ) First Quarter Results and Conference Call Comments; Rating Increased to Strong Speculative Buy
Richard W. West, CFA
June 18, 2006. Lower yields for loans sold and higher expenses take their toll on TMSF Holdings, Inc., resulting in second quarter in a row of break-even net income. Rating increase duie to relatively low valuation and long-term prospects for loan originations and improving yield spread. REIT reorganization on hold.
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News Article Highlights Risk of Tainted Tissue Implants; Makes Compelling Case for Necessity Of A Sterilization Process Such As Clearant's
Sally H. Wallick, CFA
June 16, 2006. Clearant, Inc. (OTCBB: CLRI). A lengthy June 10, 2006 Associated Press article, "Little Regulated Tissue Industry Can Mean Routine Surgeries Go Horribly Wrong," makes a very compelling case for the necessity of a sterilization process such as Clearant's, which is one of the only commercially available technologies that inactivates all known infection-transmitting pathogens in biological products without affecting the functional integrity of the treated material. Among other things, the story notes that the tissue transplant industry is poorly regulated; tissue is not tested as well as blood for infectious diseases; doctors and hospitals are not required to report tissue infections to health officials; and many doctors are unaware of the risk of tainted tissue. We reiterate our Speculative Buy rating on Clearant's shares.
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Nephros Strong Speculative Buy Rating In Initiating Coverage; Capable Of Changing The Standard Of How ESRD Patients Are Dialyzed
William R. Prather, RPh, MD
June 15, 2006. We believe the common stock of Nephros (AMEX: NEP) is potentially a compelling investment, based on the Company's Mid-Dilution Diafiltration (MDF) technology. We believe this technology offers a dialysis alternative that is significantly more efficacious for patients with end-stage renal (kidney) disease (ESRD) than the more commonly used traditional hemodialysis (HD) process. Additionally, the Nephros dialysis technique should be cost neutral for the dialysis treatment providers and eventually viewed favorably by the payors for dialysis services and products. Therefore, we believe Nephros' MDF technique is capable of changing the standard of how ESRD patients are dialyzed. The Company has initiated sales utilizing this technology with their initial product, the OLpr™ MD190 filter, to targeted countries in Europe. Additionally, it plans to expand its market penetration globally with the addition of the OLpr™ H2H ™ add-on module and the OLpr™ NS2000™ HDF dialysis machine over the next several years. Nephros has also leveraged its filtration technology to enter the healthcare facility subset of the water filtration market and has already obtained sales with its Dual Stage Ultrafilter (DSU). We speculate the Company's water filtration technology has the potential to become the predominant revenue driver over the near term for Nephros.
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Joystar Adds Record Number of Paying Agents in 2006; Major Insider Adds To His Position
Richard W. West, CFA
June 15, 2006. Joystar, Inx. (OTCBB: JYSR) fortunes continue to increase, while stock is dragged down by general market weakness in small-cap stocks. Agent growth impressive, especially considering the new fee-based membership. The 24%+ insider continues to add to his position. Strong Speculative Buy Rating reiterated.
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Apex Silver Appoints New Chief Financial Officer
Les W. Childress
June 14, 2006. Apex Silver Mines, Ltd. announced that Gerald Malys was appointed Senior Vice President and Chief Financial Officer effective immediately. Mr. Malys has considerable accounting and senior management experience. Coincident with Apex's evolution as an operating company, the financial reporting requirements have increased, and Mr. Malys' presence and experience will be important going forward. We currently have no rating or price target on the Company.
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Oragenics to Enter Clinic With Its Oral Probiotic Mouth Rinse; Reiterate Speculative Buy Rating
Wayne M. Lottinville, CFA
June 14, 2006. Oragenics intends to begin within a month a human study for its oral probiotic product, Probiora3. The study is designed to determine the effects of the mouth rinse on the oral health of twenty subjects who will use the mouth rinse twice daily for one to two months. Probiotics is the administration of live bacteria to confer a health benefit and is typically associated with products such as yogurt that contains live bacterial cultures for maintaining gut health. Probiora3 is a blend of three natural strains of oral bacteria that have been clinically associated with healthy teeth and gums. Preclinical data indicate that Probiora3 can maintain levels of key bacteria that are necessary for healthy gums and teeth, and it also offers the potential for whitening teeth and decreasing bad breath. We reiterate our Speculative Buy rating on the Company's stock.
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(CORRECTED) Mixed 2Q results; Questar should contribute in 2H; estimates reinstated; target and rating raised.
Sally H. Wallick, CFA
June 14, 2006. Touchstone Applied Science Associates (OTCBB: TASA) second quarter results were mixed. The good news was a robust 46% year-over-year revenue increase to $3.5 million, which was well ahead our $3.1 million estimate. On the other hand, expenses were higher than projected, resulting in a quarterly loss of $0.09 per share, well below last year's $0.04 per share profit and our estimate of break-even results. Management cited higher expenses related to large contract startup costs for the increase in costs. A key issue for future earnings will be the Company's June 1, 2006 purchase of Questar Educational Systems, Inc. Fiscal 2005 pro forma revenue for the combined Company would have been approximately $36 million (versus Touchstone's reported fiscal 2005 revenue of $11.7 million) and its post-acquisition booked backlog of orders totals about $100 million through 2010. We are reinstating earnings projections, which were temporarily suspended following announcement of the Questar acquisition. Our new fiscal 2006 and 2007 estimates, including Questar as of June 1, 2006, are $0.25 and $0.43 per share, respectively (up from $0.16 and $0.24 per share, respectively, prior to the acquisition). In addition, we are raising our price target from $4.00 per share to $5.50 per share, which is less than 13 times our fiscal 2007 estimate, and our rating on the Company's shares from Buy to Strong Buy.
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Natural Gas Systems Rating Strong Buy In Initiating Coverage; Strategic Opportunity In Enhanced Oil-Recovery (EOR) Methods
Richard R. Wolfe, CFA
June 13, 2006. Natural Gas Systems (OTCBB: NGSY) is a recently established oil and gas exploration and production company with a strategic opportunity in enhanced oil-recovery (EOR) methods. The Company's leading asset, its Delhi Field in Louisiana, is attractively positioned for redevelopment as an EOR project using carbon-dioxide (CO2) flood technology. On June 12, 2006, the Company closed on a major transaction committing the Delhi Field to a CO2 project. Our estimates indicate that the Company should begin generating positive cash flow and earnings during the second half of calendar 2006 and over the longer term should accumulate proved reserves of over 10x present levels. We value the Company's common shares, using the discounted cash flow method, at $4.67 per share, a premium of nearly 70% over present trading levels and accordingly assign a rating of Strong Buy.
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Shumate Industries: Strong Speculative Buy Rating In Initiating Coverage; Potential To Become The First True Advance In Valve Design In Several Decades.
Richard R. Wolfe, CFA
June 13, 2006. Shumate Industries (OTCBB: SHMT) is an oilfield equipment and services company with a stable business base in machining operations and a high-potential, proprietary new technology for valve manufacturing. The Company has recently been recapitalized and has acquired the intellectual property rights to what holds the potential to become the first true advance in valve design in several decades. Our estimates, which include a base-case and risk-sensitivity analysis, indicate that, in the most likely combination of scenarios, the Company has the potential for a 10-fold cash-flow increase if the new valve technology achieves expected levels of market penetration. Based on discounted cash-flow analysis, we calculate an implied value for Shumate in excess of $2.00 per share in our base-case scenario, and we have assigned a Strong Speculative Buy rating and conservatively set our target price at $2.05 to reflect the startup risks associated with the new valve product launch.
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21st Century Reassures Investors; Projects Minimal Claims from Tropical Storm Alberto; Reaffirms Guidance for record 2nd Quarter
Richard W. West, CFA
June 13, 2006. Tropical Storm Alberto is mostly rain, consequently 21st Century reaffirms its guidance for a record 2nd quarter of EPS $1.00 per share. Considering the 20% decrease in the price of 21st Century's common stock and the completed negotiations with the State of Florida's Hurricane Catastrophe Fund, we raise 21st Century Rating to Buy with a 12-month price target of $18.00 per share.
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Elron Electronic Industries Ltd; Incremental Investment in AMT
Barry Raeburn
June 13, 2006. Elron (Nasdaq: ELRN) is investing an aggregate of $5 million in group company AMT. AMT is a holding company of four group companies implementing amorphous metals and nano-crystalline advance materials for various commercial applications. This portfolio holding is one of Elron's first investments outside of the Technology and Health Care sectors. We maintain our Strong Buy rating and 12-month price target of $15.
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Pacific Ethanol Rating Raised from Speculative Buy to Strong Speculative Buy in Response to Share Price Weakness
Paul J. Resnik, CFA
June 13, 2006. Pacific Ethanol Inc. (Nasdaq: PEIX) shares have been weak over the past month. We believe general market conditions, the modest pullback in crude oil and gasoline prices (which could continue in light of current inventory levels...assuming no negative exogenous political developments), and the spate of IPOs of ethanol companies have played roles in this decline. There have been no recent negative developments at Pacific Ethanol. Accordingly, we are maintaining our $35 12-month price target (see Research Notes dated 5/19/06 and 5/30/06). As Dutton Associates views 12-month upside potential of 40% as the basis for a "Strong" rating and as, based on a price of $21.94 as of this writing, we believe the shares now offer upside potential of 60%, we are raising our rating from Speculative Buy to Strong Speculative Buy.
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Telkonet Inc. Announces Additional Internet Based Services in NYC; NuVisions to begin IPTV Trials; Speculative Buy Rating Reiterated
Richard W. West, CFA
June 13, 2006. Telkonet Inc. (TKO: Amex) subsidiary, Microwave Satellite Technologies, Inc. (MST) trademarked NuVision is beginning IPTV tests in NYC, the first such service to be offered in this area. Telkone's stock under pressure with general market and the lack of "hard" news. Speculative Buy is reiterated.
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Avigen Speculative Buy Rating In Initiating Coverage; Its Advantage Over Other Early BioPharmaceutical Companies: Their Primary Product Portfolio has Already Been Extensively Used Internationally
William R. Prather, RPh, MD
June 12, 2006. Avigen (NasdaqNM: AVGN) is an early-stage biopharmaceutical company whose business strategy to date has been unique. The Company has licensed or otherwise patented compounds that already have a clinical track record. The Company's lead products, AV650 (tolperisone) and AV411 (ibudilast), have seen significant commercial experience internationally and we believe their safety profile is already established. Avigen embarked upon a new business strategy of focusing on therapeutics for neurological and neuromuscular disorders beginning in 2005. Because the Company is relatively early in exercising this new business strategy, we believe Avigen's market value will rise over the near term based on milestone announcements surrounding the Company's product portfolio. Additionally, we also compared Avigen with other early-stage companies involved in Phase I clinical trials, realizing that Avigen's value should be enhanced because of the assumed safety of AV650 and AV411 relative to their extensive clinical use internationally. Based on upcoming milestone announcements and comparing the current value of Avigen to other early-stage companies involved in Phase I clinical trials with their respective lead products, we have assigned a 12-month price target on the common stock of $8.00 and an investment rating of Speculative Buy.
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(Corrected) BluePoint Energy Speculative Buy Rating Maintained; Significant Strides
Richard W. West, CFA
June 12, 2006. We maintain our rating of Speculative Buy for Chapeau, Inc. dba BluePoint Energy (OTCBB: CPEU). Since our initial Research Report, BluePoint Energy has made great strides. BluePoint has completed, tested and delivered a state-of-the-art cogeneration system, the Lean-One® CHP Module, named for its lean-burn configuration and characteristics. The system employs a proprietary emission process utilizing BluePoint's super-cooled exhaust gas recirculation system, SC-EGR™. On March 2, 2006, announced an initial Discount Energy Agreement with an operating company of Starwood Vacation Ownership and this agreement with Starwood could result in revenue of $1.9 million in the calendar year 2006. On May 25, 2006, BluePoint Energy joined with URS Corporation (NYSE:URS-$41.51) respond to a request for qualifications (RFQ) solicited by the State of California Department of Corrections and Rehabilitation (CDCR) to provide energy conservation services to the 33 adult institutions and 7 juvenile justice facilities.
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Internet Gold Buy Rating and Price Target Maintained; Upgrading Estimates; Cash Rich Position For Consolidation
Rafael K. Kapelinski
June 12, 2006. Internet Gold (Nasdaq: IGLD) has posted better-than-expected 1Q 2006 revenues while EPS was in line. Revenues came in at USD 20.33 million (+15.5% sequentially), versus our estimates of USD 18.4 million, and EPS was USD 0.08. Most important, 1Q 2006 results demonstrated that the growing proportion of telephony revenues as a percentage of the total revenues should continue to exert pressure on the Company's margins. So far, the Company has been successful in staving off most of the pressure by streamlining operations and slimming down the operational cost structure. Also, the recent operational reorganization should provide the Company with some additional leeway in terms of reducing operating costs. The Company is cash rich, which gives it a considerable flexibility in terms of consolidating the target markets in Israel. We upgrade our revenue estimates and maintain our Buy rating as we believe that Internet Gold remains attractively valued.
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Electric City's Common Stock (ELCC) To Trade On OTC Bulletin Board; 1-for-15 reverse split approved.
Richard W. West, CFA
June 12, 2006. Reverse split of 1-for-15 and delisting from Amex and trading on OTC-BB are the first steps in a major reorganization for Electric City (OTCBB: ELCC).
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Elron Electronic Industries Ltd.; Enure Networks Announces Product Availability And First Major Customer
Barry Raeburn
June 12, 2006. Enure Networks, an Elron group company (Nasdaq: ELRN), has announced general availability of its two new network management software products targeted at broadband users. The company has also announced its first major service provider customer, Israel's largest telecommunications company. This announcement illustrates the significant breakthrough technologies that Elron has been able to identify and invest in over the last year. We maintain our Strong Buy rating and 12-month price target of $15.
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Touchstone Second Quarter Preview. Buy Reiterated.
Sally H. Wallick, CFA
June 12, 2006. Touchstone Applied Science (OTCBB: TASA) plans to report second quarter earnings on June 14. Management will discuss the results on a conference call at 11 A.M. (EST) that morning. The call-in number is 877-407-9039. We project second quarter revenue of $3.1 million, up 30% year over year, and earnings of $0.00 per share, down from last year's $0.04 per share. While Touchstone's second quarter results should provide an indication of business trends as the Company entered the second half of fiscal 2006, a key issue for future revenue and earnings will be the Company's recent acquisition of Questar Educational Systems, Inc. We view the Questar acquisition as a watershed, transforming event for the Company, which should strengthen its competitive position, raise its profile in the marketplace, enable it to pursue higher-revenue, more inclusive contracts, and add experienced, capable senior managers. We reiterate our Buy rating on the Company's shares.
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Sky Petroleum: Perforation and Initial Flow of Mubarek H-2 Well
Richard R. Wolfe, CFA
June 10, 2006. On June 9, 2006, Sky Petroleum (OTCBB: SKPI) announced perforation details and initial flow information for its first development well in the Mubarek Field offshore Sharjah, United Arab Emirates. The new information indicates that the operator and its consultants are still working on isolation and stimulation of the producing zone in order to bring the initial well into production at a flow rate that is in line with earlier projections. Dutton has a BUY rating on SKPI shares at a target price of $3.90 per share.
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Guideline Rating Maintained At Strong Buy; Strategic and Market Intelligence
David Riedel
June 09, 2006. Guideline (OTCBB: GDLN) is an outsourced information service company. Guideline is the company that a business calls when it needs information collected and aggregated to help it make a decision about a new business, product, acquisition, opportunity or threat. It is, we believe, the only single-source provider of business information and research in the market. Through its recent acquisitions, the Company has a complete line of business research solutions and can serve whatever research needs a client might have. This powerful platform is starting to show results in terms of cross-selling. Product Development Intelligence, for example, has had some success incorporating the larger market study capabilities of the Custom Market Research group into projects it is doing for its clients. In addition, Strategic Intelligence has developed in recent quarters a number of projects that have evolved into projects requiring the consumer survey work of Custom Market Research. The company has been developing and rolling out new businesses which have combined primary and secondary research, highlighting the strength of these two capabilities under one umbrella.
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Pipeline Data: Rating Maintained At Strong Buy; Strong Leverage In The Pipeline Model.
David Riedel
June 09, 2006. Pipeline Data (OTCBB: PPDA) provides integrated transaction processing services for all major credit cards. The Company offers card processing services in three key areas: wireless mobile payment, e-commerce solutions and retail merchant payment. Pipeline Data has spent the past three years building itself into a significant player in the processing of credit card transactions. Including recently announced and intended acquisitions, the Company's portfolio includes 25,000 merchant accounts. Recent results showed strong trends. Consolidation of back-office functions has dramatically boosted margins. Gross profit margin for 2005 rose to 27% (from 20% in 2004) showing, we believe, the strong leverage in the Pipeline model. Based on the valuation for similar payment processing companies, we estimate fair value for the shares at $2.00 (20x 2007E EPS).
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Telkonet Speculative Buy Rating Maintained; Cusp of Generating Meaningful Revenue Growth From The Sale of Its Proprietary, High-speed Power Line Communications (PLC) Networking Solution.
Richard W. West, CFA
June 09, 2006. Telkonet (AMEX: TKO) is at the cusp of generating meaningful revenue growth from the sale of its proprietary, high-speed power line communications (PLC) networking solution. Telkonet received multiple purchase orders from Electronic Data Systems (NYSE: EDS $24.46) under a government contract to provide its PLC system to the U.S. Navy and Marine Corps. Telkonet has entered into a Master Services Agreement with GTSI Corp. (NasdaqNM: GTSI $6.60) to market to the U.S. Department of Defense (DOD), federal, civilian, and state and local governments. Telkonet is making strides in marketing and manufacturing, its PLC systems, which have been installed in hotel and commercial buildings throughout 45 states domestically. On March 30, 2006, Telkonet announce the rollout of its Internet systems in the Trendwest Resorts. On April 17, 2006, Telkonet announced that MST purchased five WiFiber™ wireless fiber links from GigaBeam (Nasdaq: GGBM $10.65) to be deployed in New York City. MST is utilizing GigaBeam's WiFiber to build the world's first 70-80 GHz ultra high-speed resilient loop network in New York City. This will provide Internet Protocol Television (IPTV), Voice over Internet Protocol (VoIP), Internet access and area WiFi access.
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Maine & Maritimes: Subsidiary Acquires PACE Engineering. Speculative Buy Rating Reiterated.
Sally H. Wallick, CFA
June 09, 2006. The Maricor Group's (Maine & Maritime: AMEX: MAM) Canadian subsidiary acquired the assets of PACE Engineering, a leading Atlantic Canadian electrical engineering firm. As a result of the PACE acquisition, The Maricor Group, Canada became the largest consulting electrical engineering design firm in Atlantic Canada, boosted revenue and market share, strengthened its competitive position, and expanded its capabilities. We reiterate out Speculative Buy rating on Maine & Maritimes common. We believe that the stock's valuation is attractive on a number of measures. It is trading at roughly a 50% discount to book value per share and we estimate the Company's worth at approximately $22-$26 per share on a sum-of-the-parts basis.
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Arcadia Resources Announces Creative Initiative to Staff Non-emergency Medical Clinics in Michigan; Building on Sears Initiative; Buy Rating Reiterated
David Riedel
June 08, 2006. Arcadia Resources (OTCBB: ACDI) Recently announced what we consider to be a creative initiative to staff non-emergency medical clinics in Michigan. The concept of clinics in retail establishments builds on the company's initiative to sell healthcare products in Sears. While financials are not yet available we believe this is a strategic positive - Reiterate Buy and $3.75 price target.
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HydrogenPower: Announces Vehicle Conversion to Hydrogen Hybrid Using Hydrogen Power Inc. Technology.
Sally H. Wallick, CFA
June 08, 2006. Year to date, Hydrogen Power International's (OYCBB: EQTX) Hydrogen Power Inc. (HPI) subsidiary has made steady progress toward achieving its goal of commercializing it proprietary hydrogen-production technology including, most recently the conversion of an internal combustion engine (ICE) vehicle to a hydrogen hybrid with a dual fuel system that can shift between gasoline and hydrogen. The conversion of an ICE vehicle is the latest sign of progress in Hydrogen Power International's commercialization strategy. From an investment standpoint, we believe that HPI's hydrogen-production process has important differentiating characteristics that enhance its long-term commercial potential. We rate Hydrogen Power International common Neutral.
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Lantronix: Completes $5.0 MM Debt Financing
David P. Soetebier, CFA
June 08, 2006. Lantronix (Nasdaq: LTRX), a leading provider of machine to machine (M2M) networking devices recently announced that it had entered into a two-year secured revolving Loan and Security Agreement with Silicon Valley Bank that provides for borrowings up to $5.0 million. Borrowings under the Loan Agreement bear interest at the prime rate plus 1.75% per annum. The Company is required to pay an unused line fee of 0.50% on the unused portion of the Loan Agreement. Our fiscal 2006 and fiscal 2007 estimates are unchagedand. Our Speculative Buy rating is maintained
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LJ International: JCK Jewelry Order trends Possible. Strong Speculative Buy Reiterated.
Sally H. Wallick, CFA
June 08, 2006. LJ International (Nasdaq: JADE) participated in the 2006 JCK jewelry show, which was held in Las Vegas from June 3 through June 7. This show, which is one of the year's leading exhibitions in the global jewelry business, is attended by designers, manufacturers and buyers from all over the world. Based on what the Company has done in the past, we believe that it may announce wholesale orders received at the show some time in the next couple of weeks. We are optimistic that the Company had a successful show, given strong wholesale demand for its merchandise in recent periods and the fact that LJI featured a broad range of merchandise at the show and introduced a new product line. We reiterate our Strong Speculative Buy rating on the Company's shares.
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PFSweb Completes Private Placement of Five Million Common Shares
David P. Soetebier, CFA
June 08, 2006. PFSweb Inc (Nasdaq: PFSW) has sold 5.0 millin shares of its common stock at 1.00 per share. Proceeds to be used for general corporate purposes. There is no change in our rating (Strong Speculative Buy) or 12-month target of $3.00 per share.
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Quest Files Registration Statement; Announces Other Events
Richard R. Wolfe, CFA
June 08, 2006. Quest Oil (OTCBB: QOIL) filed SEC Form SB-2/A (Amendment No. 6) on June 1st, pertaining to its reoffering of common stock. The June 1st amendments follow after an earlier, May 15, 2006 filing of a request for the withdrawal of the reoffering registration statement. Thus, the new filing allows the registration process to resume. In previous reports during April and May, 2006, we downgraded our rating on Quest, originally "strong speculative buy" to "neutral" and then to the present rating of AVOID.
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21st Century Declares Regular Third Quarter Dividend; Neutral Rating Reiterated
Richard W. West, CFA
June 07, 2006. 21st Century (NasdaqNM: TCHC) declares regular dividend for third-quarter; on track for a total annual payout of $0.48 per share. Dividend yield currently 3.2%. Comments on negottiations with private reinsurance providers. Neutral Rating Reitereated
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Forgent Reports Results for Third Quarter and Nine Months; Strong Buy Rating Reiterated
Richard W. West, CFA
June 07, 2006. Forgent Networks (NasdaqNM: FORG) Third Quarter ended 4/30/06 came in as expected. IP revenue from Xerox license (settled after Markman Hearing); NetSimplicity's revenues growing; margins increasing; expenses reflect management's strict control' litigation moving ever so slowly - but moving. Stock undervalued and not recognizing the past royalties of $110.0 million nor the possible future royalty revenue over $100.0 million. Reiterate Strong Buy.
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O2Diesel AMEX Listing Update. Speculative Buy Reiterated.
Sally H. Wallick, CFA
June 07, 2006. O2Diesel Corp (AMEX: OTD) We expect O2Diesel to be in compliance with AMEX listing requirements at the end of the second quarter. We reiterate our Speculative Buy rating on the Company's shares.
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Sunwin International Neutraceuticals: Announces Acquisition of Qufu Pharmaceuticals Factory
Stanley Ng
June 07, 2006. Sunwin International Neutraceuticals (OTCBB: SUWN) announced today it has entered into an agreement with Shangdong Yulong Group Company Limited to acquired 98.5% ownership of Qufu Pharmaceuticals Factory. Qufu Pharmaceuticals Factory generated approximately $6 million in annual sales in the past. For the time being, we maintain our earnings forecasts for FY2007 and FY2008, pending release of more information for the acquisition of Qufu Pharmaceuticals Factory, though we believe it should be EPS accretive. We reiterate our Strong Speculative Buy recommendation on Sunwin International.
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Telkonet Announces Resignation of Chief Financial Officer; Search for a Successor Commenced
Richard W. West, CFA
June 07, 2006. Telkonet, Inc. (Amex: TKO). Barry Smith, CFO resigns, search started for successor. Telkonet's common stock selling off in a weak market, as lack of news creating a buyers vaccum. Speculative Buy Rating Reiterated.
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Nymox Strong Speculative Buy Rating Maintained In Update Coverage; NX-1207 for BPH On Track
William R. Prather, RPh, MD
June 06, 2006. On May 16, 2006 Nymox (Nasdaq: NYMX) announced long-term efficacy results from an open-labeled Phase 1-2 test on NX-1207 for benign prostatic hyperplasia (BPH) that was conducted approximately three years ago. We believe the press release left the reader unclear on what we believe is a very important fact - The patient population involved in this study was exposed to NX-1207 for a total of only 30 days. Over the last 2 1/2 to 3 years, therefore, the majority of patients available for follow-up have had to use no other treatment modality to treat their previously symptomatic BPH other than the initial 30-day exposure to NX-1207. Although the initial open-labeled study involved only 20 patients, the 15 or so available for follow-up provided statistical significance over controls. We believe a major reason to invest in Nymox Pharmaceutical Corporation is related to the potential of the Company's NX-1207 for BPH. Our monitoring of the clinical development of this compound indicates that the product is on track to enter Phase III clinical trials in latter 2006. Additionally, we believe a marketing collaboration for NX-1207 could be announced even before these Phase III trials are initiated. Based on the assumptions that Nymox will announce a marketing partner over the near term and will be in Phase III clinical trials next year at this time, we are maintaining our 12-month price target on the common shares of $6.25 and our rating of Strong Speculative Buy.
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21st Century Announces Completion Of Stock Buy-Back;
Reveals Reinsurance Information In Sec 8K Filing;
Neutral Rating Maintained
Richard W. West, CFA
June 06, 2006. 21st Century (NasdaqNM: TCHC) completes stock buy back program and reveals the details of the reinsurance policy for the 2006 hurricane season. The reinsurance policy with the Florida Hurricand Catastrophe Fund provices lower coverage than 2005 reinsurance but premium is also lower. We maintain Neutral Rating
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Biophan Technologies Presentation At Dutton Associates Health Sciences Small Cap Conference.
Richard W. West, CFA
June 06, 2006. Biophan Technologies, Inc. (OTCBB: BIPH) updates investors at Dutton Associates Health Sciences Conference. Discusses intellectual property status and financing plans for balance of Fy2006. Bipphan's solution for safe imaging with the use of MRI imaging being embraced by major medical device manufacturers. Speculative Buy Reiterated.
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Clearant's direct sales strategy has compelling revenue-generating potential. Speculative Buy rating reiterated.
Sally H. Wallick, CFA
June 06, 2006. Clearant, Inc. (OTCBB: CLRI) is supplementing its strategy of licensing the CLEARANT PROCESS(R) to human tissue suppliers with a direct sales effort in which Clearant will purchase tissue and market it to surgeons and hospitals using the Company's own sales force. In this note, we discuss the revenue-generating potential of this strategy. Specifically, we conclude that demand from a single surgeon could result in annual revenue of more than $300,000 per year, which is more than Clearant's total license fee revenue in 2005. Therefore, we are optimistic that Clearant's direct marketing-to-surgeons strategy could result in a rapid acceleration of revenue and gross profit growth. We reiterate our Speculative Buy rating on the Company's shares.
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Electric City Files Sec Notification Of Removal From AMEX; Neutral Rating Reiterated
Richard W. West, CFA
June 06, 2006. Electric City (AMEX: ELC) is leaving the American Stock Exchange and will possibly trade on the OTCBB. Electric City needs to complete financing, pay down debt and complete acquisition of Parke Industries. Pending positvie resolution of these events, we maintain our Neutral Rating.
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Equitex completed its name change to Hydrogen Power International, Inc. and announced a technological breakthrough; the Company continues to pursue a listing on a major exchange.
Sally H. Wallick, CFA
June 06, 2006. Equitex, Inc. (OTC: EQTX) completed its name change to Hydrogen Power International, Inc. Also, Equitex's wholly owned subsidiary, Hydrogen Power, inc. (HPI) continues to make progress toward commercializing its technology as indicated by its development of a 30-watt slow-release portable reactor that enables HPI to produce hydrogen at various release rates and wattage levels. Equitex, which currently is traded on the Pink Sheets, is pursuing a listing on a major exchange. We reiterate our Neutral rating Equitex's shares.
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DXP Enterprises: Files One Million Share Shelf Registration and Announces $10 Million Acquisition; EPS Estimates Raised; Rating Remains Buy
Paul J. Resnik, CFA
June 05, 2006. Last week there were two developments at DXP Enterprises Inc. (Nasdaq; DXPE) which we believe are related. On May 31, DXP filed a Form S-3 with the Securities and Exchange Commission a shelf registration for 1 million shares of common stock which may be sold "from time to time." The Company did not indicate how it intends to use the offering proceeds in the filing. However, in the past, DXP has made it clear that it seeks to grow both internally and through acquisitions; and on June 1 the Company announced that they had acquired the businesses of Production Pump and Machine Tech for approximately $10.1 million. DXP stated that it anticipates the acquisition to be immediately accretive to earnings. Our initial computation is that, based on EBITDA for the 12 months ended April 30, 2006 and a prime lending rate of 7.50%, the acquisition will add $0.02 to DXP's 2006 earnings per share and $0.05 to DXP's 2007 EPS. Accordingly, we are tentatively raising our EPS estimates to $1.84 for 2006 and $2.50 for 2007. Cost savings following the acquisition and growth for the acquired businesses could add to our assumed benefit. We have adjusted our 12-month target price up $1 to $50. Our rating on DXP shares remains Buy.
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HydroGen Shares Outperform in May. Speculative Buy Rating Reiterated.
Sally H. Wallick, CFA
June 05, 2006. Share prices of 14 companies that participate in the hydrogen industry, as a group, retreated in May, falling an average of 15% versus a 3% decline for the S&P 500. Year to date, the group outperformed the market by a wide margin, increasing 22%, on average, compared with a 2% rise in the S&P 500. HydroGen's (OTCBB: HYDG) share price bucked the stock market and hydrogen group trends in May, increasing 32% (bringing the stock's year-to-date performance to plus 42%). We believe that HydroGen benefited in part from the completion of a private placement that raised nearly $26 million, gross, sufficient capital to complete a large part of stages one and two of the Company's business plan. Also, we believe that HydroGen has done a good job of communicating its business strategy and, therefore, has attracted the attention of investors seeking companies positioned to benefit from increased demand for clean, renewable sources of energy. We reiterate our Speculative Buy rating on HydroGen's shares.
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(Correction) Woize International Ltd Speculative Buy Rating In Initiating Coverage; Develops And Provides Digital Communication Services Via The Internet
Rafael K. Kapelinski
June 02, 2006. Woize International (OTCBB: WOIZ) develops and provides digital communication services. The Company's primary product, a user-friendly software application dubbed WoizeTM, can be downloaded to a PC or a mobile platform such as a PDA or a Smartphone that runs Microsoft Windows' XP, PocketPC or Mobile 5.0 and can be used for making low-cost phone calls using the common infrastructure of the Internet. The Company's vision is to become a recognized European service provider of digital communication services with its own mobile phone virtual service value proposition. So far, the Company has acquired the bulk of its paying customer base directly. In the future, however, we believe that the Company's branding program should increasingly emerge as the most powerful value driver. The Company has been aggressively rolling out its branding program to third parties that want to add value to their consumers through implementing a unique privately-branded version of the WoizeTM services. Woize's branding strategy allows Internet companies, including Internet service providers (ISPs), Internet application companies and other Internet media players to enhance their online presence with a communications component. The WoizeTM client software allows the Company's branding partners to deploy additional revenues from innovative click-to-call, click-to-pay and advertising services. These features are truly unique and set the Company apart from the competitors, including Skype. Woize's solution lends itself particularly well to the mobile paradigm. Most importantly, the Company's architecture uses Session Initiation Protocol (SIP), while other competing applications, such as Skype, use proprietary file-sharing protocols. Woize faces stiff competition from other digital communications companies such as Skype, diversified Internet media companies (MSN, AOL, Google, Yahoo), and providers of VoIP services including Vonage, Comcast, and Time Warner. However, unlike Woize, none of them offers a branding solution.
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National Coal (Nasdaq: NCOC) Appoints New Chief Executive Officer
Richard R. Wolfe, CFA
June 02, 2006. On May 26, 2006, National Coal announced that Daniel A. Roling, formerly of Merrill Lynch (NYSE: MER), will join the Company as its Chief Executive Officer, replacing NCOC founder and largest stockholder Jon E. Nix, who will continue as the Company's board chairman. We have a BUY rating and $14.50 target price on NCOC. Our full quarterly update on National Coal is due out shortly.
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Touchstone Aplied Science Associates (OTCBB: TASA) Questar acquisition appears to have the potential to be a winner for all parties involved, including Touchstone's shareholders. Buy reiterated.
Sally H. Wallick, CFA
June 02, 2006. Touchstone's management held a conference call to discuss the Company's acquisition of Questar Educational Systems, Inc. This acquisition appears to have the potential to be a winner for all parties involved, including shareholders. We view it as a culmination of Touchstone's strategies in recent years aimed at broadening its spectrum of products and services, growing revenue, gaining market share and strengthening management and consider it a watershed, transforming event for the Company. Therefore, we reiterate our Buy rating on the Company's shares.
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Clearant, Inc. presents at Dutton investment conference; highlights potential of direct sales strategy to drive revenue growth and share gains. Speculative Buy reiterated.
Sally H. Wallick, CFA
June 01, 2006. Clearant, Inc. (OTCBB: CLRI). Alain Delongchamp made a presentation at the Dutton Associates "Recognizing Opportunity" Health Sciences Small Cap Conference in San Francisco on May 31. Among other things, he discussed the Company's new direct sales strategy, which we believe has the potential to accelerate revenue growth and boost market share. We reiterate our Speculative Buy rating on the Company's shares.
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Provectus Pharmaceuticals (OTCBB: PVCT) Reports "Bystander Effect" Observed in Human Cancer Trials; Speculative Buy Rating Reaffirmed
Wayne M. Lottinville, CFA
June 01, 2006. The CEO of Provectus Pharmaceuticals Inc. (OTCBB: PVCT) reported today that the "bystander effect" was observed in several subjects during the Phase 1 clinical trial for treatment of advanced metastatic melanoma with the Company's lead drug candidate, Provecta (Rose Bengal). The bystander effect occurs when a drug used on one tumor causes the disappearance of other untreated tumors. The CEO said that to the best of his knowledge, this has never been reported in melanoma patients or with any other cancers of humans. The Company had previously reported observing the bystander effect in animals, but today it has confirmed that this effect has been replicated in humans. The bystander effect is significant because it suggest that hard-to-find secondary metastatic tumors perhaps could be successfully treated along with the treatment of primary tumors.
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Touchstone Applied Science Associates, Inc (TASA) acquires Questar, more than tripling revenue and enhancing long-term prospects. We reiterate our Buy rating on the Company's shares.
Sally H. Wallick, CFA
June 01, 2006. Touchstone acquired privately held Questar Educational Systems, Inc., a leading provider of educational testing material production, distribution, scoring, reporting and data analysis services, more than tripling revenue. Touchstone will hold a conference call at 1 p.m. today (Eastern Standard Time) to discuss the acquisition. We will review our estimates and provide more details about the acquisition after the call. However, our initial reaction to this complementary acquisition is very positive, since we believe that it broadens Touchstone's portfolio of products and services, strengthening its competitive position and positioning it to gain market share. Also, we believe that the acquisition has the potential to be additive to earnings. We reiterate our Buy rating on Touchstone's shares.
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US Energy Corp. (Nasdaq: USEG) Major Update in First Conference Call; Speculative Buy Rating Reiterated
Les W. Childress
June 01, 2006. U.S. Energy has made several positive announcements recently regarding each area of its activities. All have come on top of a vastly improved balance sheet. We believe that U.S. Energy shares are considerably undervalued and will detail our valuation of USEG's assets in our update report which is currently in process. U.S. Energy has made enormous strides both operationally and financially in recent months. The Company's asset base continues to increase in value. For now it is an undervalued asset play but working to become an earnings play over time. We reiterate our Speculative Buy rating.
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Oragenics Initial Rating At Speculative Buy; Several Promising Products If Successfully Commercialized, Several Could Result In Annual Sales In Excess Of $1 Billion.
Wayne M. Lottinville, CFA
May 30, 2006. Oragenics (AMEX: ONI) is an early-stage biopharmaceutical company with several promising products in its product pipeline. These include a natural, orally available compound with an excellent safety profile that shows great promise in treating obesity; an advanced antibiotic against which none of the bacteria tested have yet been able to develop genetically stable resistance; "Disruptive" oral health therapies, including one that quickly and easily eliminates the major cause of tooth decay; and a pioneering way to synthesize useful quantities of difficult-to-produce bioactive peptides, including small-molecule antibiotics. If successfully commercialized, several could result in annual sales in excess of $1 billion. Successful progress in any one of the Company's development programs could add $100 million or more to Oragenics' market capitalization. The most significant impediment to Oragenics' progress is its financial constraints. The Company must secure adequate financing to continue developing its technology. Jeffrey Hillman, D.M.D., Ph.D., confounded Oragenics and serves as the Company's chief scientific officer. The Company's current pipeline is largely the result of Dr. Hillman's 25 years of research at the Forsyth Research Institute, affiliated with Harvard University in Boston, and at the University of Florida. The conclusions of this report assume that Oragenics will obtain the financial backing it needs in the near future, perhaps through the sale, licensure, or partnership of one or more of its pharmaceutical development programs. We also assume that Oragenics will achieve its clinical goals within our target time frame. Based on these assumptions combined with a degree of caution about the Company's financing needs, we rate Oragenics' a Speculative Buy, with a 12-month price target of $3.75, which is based on the potential increase in market capitalization cited above.
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Pacific Ethanol Announces $145 Million Private Placement and Expanded Plant Construction Plans; Price Target of $35 and Speculative Buy Rating Maintained; Ethanol Industry Comments
Paul J. Resnik, CFA
May 30, 2006. Pacific Ethanol, Inc. (Nasdaq: PEIX), announced on May 26, 2006 that it had entered into a definitive purchase agreement with a group of institutional investors to sell 5,496,583 shares of common stock at a price of $26.38 per share for proceeds of $145 million, gross, and $138 million, net. The investors will also acquire warrants under which they will have the right to purchase an additional 2,748,295 shares of common stock at $31.55 per share. Proceeds will be used to "both accelerate its stated goal of completing five ethanol production facilities totaling 220 million gallons per year by the end of 2008 and to expand its plans to complete additional ethanol production facilities, increasing total nameplate capacity to 420 million gallons per year by the end of 2010" and "for strategic investments in corn and cellulose process technologies." We are maintaining our $1.85 2008 earnings per share estimate, $35 12-month price target, and Speculative Buy rating for Pacific Ethanol at this time.
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Clearant's Management Will Present At Dutton Associates Health Sciences conference
Sally H. Wallick, CFA
May 28, 2006. Clearant's (OTCBB: CLRI) management will be one of 15 companies to present at Dutton Associates' Small Cap Conference on Health Sciences in San Francisco on May 31. We expect management to discuss the Company's growth strategies, which are aimed at gaining share in new and existing markets and accelerating revenue growth. We rate Clearant shares Speculative Buy.
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TMSF HOLDINGS ANNOUNCES DELAY IN FILING FIRST QUARTER RESULTS SYMBOL CHANGED TO TMFZE PENDING RELEASE OF RESULTS
Richard W. West, CFA
May 28, 2006. TMFS Holdings' (OTCBB: TMFZ) common stock sold down lst week in response to late filing and symbol change to TMFZE. Reiterate Speculative Buy due to depressed market value level and we expect common stock to recover after release of first quarter results.
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Elron Maintained At Strong Buy Rating; NAV Discount Remains at 23%; A Free Call Option On Elron's Private Company Portfolio Investments
Barry Raeburn
May 26, 2006. Based in Tel Aviv, Israel, Elron (Nasdaq; ELRN) is a leading multinational technology holding company. Since 1962, Elron has been a major force in the development and commercialization of Israel's technological discoveries in the defense electronics, telecommunications, semiconductor and medical device sectors. In recent years, the Company has continued and accelerated its focus in the high-growth segments of the medical devices, telecommunications, and semiconductor industries. Throughout the years, Elron has excelled at building companies that effectively take advantage of the country's unique knowledge base, entrepreneurial talent, and human capital. At the current market value, we believe investors are getting a free call option on Elron's private company portfolio. A bottoms-up view of Elron's NAV shows the private companies are contributing a negative value, creating a significant discount. Altogether, including cash, public company holdings, and private companies at book value, the Elron NAV is $415 million. The discount for the private company holdings is close to $95 million, or approximately $3.25 per share. We recognize there are difficulties in valuing development-stage and other private companies. However, given Elron's lengthy track record of success in developing companies, assigning a negative value to the private portfolio seems too large a penalty, in our view. In our NAV calculation, we use either book value or Elron's ownership percentage of the valuation at the most recent financing round. Using this method, we arrive at a more than 23% discount of NAV to market price of Elron's publicly traded shares.
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IntegraMed: Maintained At Strong Buy Rating In Update Coverage; Tremendous Operating Leverage in Model Has Begun To Materialize
David Riedel
May 26, 2006. IntegraMed America (Nasdaq: INMD) is the leading supplier of physician practice-management products and services for clinical practices involved with treating infertility. IntegraMed supports its physician practices with strong consumer-oriented marketing, software systems to enhance effectiveness and efficiency, and bulk buying of drugs and lab supplies to lower costs. Treatment for infertility is a fast-growing segment of U.S. health care, and IntegraMed is the only public company with exposure to this business. There is tremendous operating leverage in the business model which has begun to materialize and will, we believe, drive strong growth in profits in 2006 over 2005. We believe margins could be set to rise dramatically at IntegraMed. Gross profit margin in the most recent quarter was 240 bps above the year-ago quarter.
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O2Diesel Speculative Buy Rating Reiterated In Update Coverage; In Right Place At Right Time
Sally H. Wallick, CFA
May 26, 2006. O2Diesel (AMEX: OTD) has developed a proprietary, cost-effective ethanol/diesel fuel blend (O2Diesel™) that substantially reduces emissions. Year to date, O2Diesel has taken important steps toward commercializing its products and raising capital. It shipped an initial bulk order of its proprietary additive to a customer in Australia, announced a product development contract with the Department of Defense (DoD); signed a memorandum of understanding with Clark County, Las Vegas, Nevada, to test the Company's ethanol/diesel fuel blend, O2Diesel™; and raised approximately $7 million from private placements and warrant exercises. In addition, O2Diesel began discussions with various parties in Europe to test its fuel and to determine its revenue potential in that market. In many ways, we believe that it is in the right place at the right time to take advantage of a more favorable environment for renewable fuels, since O2Diesel addresses a growing market for clean-burning fuels with a renewable component and provides users with demonstrable benefits. We believe that the share price performance will be driven by growing evidence of the acceptance of O2Diesel in the marketplace in the U.S. and abroad, as well as key events, such as the receipt of needed regulatory approvals, the signing of new customers, and the completion of additional financings.
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Chapeau, Inc., d/b/a BluePoint Energy, Inc. (OTC-CPEU) Announced That URS Corp. To Include BluePoint Energy in Response to California Request for Energy Conversation Services.
Richard W. West, CFA
May 26, 2006. The fact that BluePoint Energy (OTCBB: CPEU) is being included in the URS Copr.'s response to Califronia's request for energy conversation services is quite a feather in BluePoint Energy's cap. Thier fully California compliant Lean-One® CHP Module technology could be the equipment of choice for California institutions to reduce energy consumption with the lowest cost - sometimes zero!. Speculative Buy Rating reiterated and price target raised to $1.75.
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Forgent: U.S. Patent and Trade Office Publishes Initial Response For Its Reexamination of U.S. Patnet 4,698,672.
Richard W. West, CFA
May 26, 2006. Forgent Networks (NasdaqNM-FORG) announces the U.S. Patnet and Trade Office's response to the Public Patent Foundation's requet for reexamination of the '672 patent shows "confrimation" of 27 claims and "rejection" of 19 claims in Forgent's patent. We stress that this is only the initial response and Forgent will respond and defend the 19 claims that were not confrimed. This is just another step in the long drawn out process relating to the infringement lawsuit. Our belief that this will not affect this lawsuit.Strong Buy Rating and 12-month price target is reaffirmed.
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Telkonet Makes Impressive Expansion Ef Its Wi-Fi Network in NYC.
Richard W. West, CFA
May 26, 2006. Telkonet's (AMEX-TKO) impressive expansion of MST's NuVisions Wi-Fi network in NYC, gives them the largest geographical area coverage and the first to offer thier subscribers the opportunity to log onto the Internet in this large "Hot Zone". Telkonet is a different company than when we first recommendned a Speculative Buy. We heartily reiterate our rating and price target of $6.25.
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Equitex Neutral Rating In Initiating Coverage; Hydrogen-production Technology Has Important Advantages Relative to Existing Methods of Hydrogen Production
Sally H. Wallick, CFA
May 25, 2006. Equitex's (OTC: EQTX) wholly owned subsidiary, Hydrogen Power Inc. (HPI), has developed a patented hydrogen-production technology, Hydrogen Now™. We believe that Hydrogen Now has important advantages relative to existing methods of hydrogen production, because it can generate hydrogen on-site and on-demand without electricity, overcoming significant transportation, storage and compression problems. Rising energy prices, growing concerns about energy security and the need for cleaner sources of energy have boosted interest in and demand for energy alternatives. Many experts believe that hydrogen is one of the most compelling long-term alternative energy options: it is abundant, renewable, nontoxic, clean, emissions-free (when used to power a fuel cell), energy efficient (it has the highest energy content per unit weight of any known fuel), and suitable to power the automobiles and other vehicles that use the majority of oil imported by the United States today. The effectiveness of the Hydrogen Now process has been proven in the laboratory through extensive testing and it is now ready for commercialization. Its addressable markets worldwide are in the multi-billions. As a development-stage company with no revenue to date, Equitex faces many execution, financial and competitive risks and challenges. Visibility on the timeline for commercialization of its technology is limited, and we believe that it is unlikely to generate revenue from commercial applications before mid to late 2007. We are initiating coverage of the shares with a Neutral rating.
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IntegraMed: 25% Stock Split in Form of Dividend
David Riedel
May 25, 2006. IntegraMed (Nasdaq: INMD) the only listed play on the strong growth in fertility services, has announced a 25 percent stock split effected in the form of a stock dividend. We maintain our Strong Buy rating and $15 price target.
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Sky Petroleum: Completion of Mubarek H-2 Well
Richard R. Wolfe, CFA
May 25, 2006. On May 24, 2006, Sky Petroleum (OTCBB: SKPI) announced the completion of its initial well in the Mubarek Field offshore Sharjah, United Arab Emirates. We regard this development as another milestone for the Company, bringing it a step closer to its goal of mounting a successful development drilling program. Dutton has a BUY rating on SKPI shares at a target price of $3.90 per share.
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MorphoSys AG Strong Speculative Buy Rating In Initiating Coverage; A Leader In The Development of Human Antibodies
Stephen L. Handley
May 24, 2006. MorphoSys AG (ADR OTC: MPSYY; XETRA: MOR), headquartered in Munich Germany, is a leader in the development of human antibodies that generates approximately 50% of its revenues from the United States. Its technology -- known as HuCAL® (Human Combinatorial Antibody Library) -- facilitates the rapid and automated production of specific antibodies, and is gaining increased recognition by the pharmaceutical industry as an attractive and often preferred method for generating antibodies used in therapeutics. This is by far the Company's most promising market in terms of potential revenues and profits, but it also sells antibodies as tools for research and as diagnostics. Although these non-therapeutic markets are less dynamic, MorphoSys is accelerating revenues of these businesses through acquisitions. The usefulness of the HuCAL technology is indicated by the fact that the Company has established partnerships with 12 of the 20 largest pharmaceutical companies in the world, and currently has a total of 18 partnerships involving 35 antibody programs. While the stock will continue to be influenced by near-term earnings, as well as by non-company specific factors such as investor appetites for small biotech companies, in our view the main focus should be on MorphoSys' longer-term potential as defined by its fundamentals. This includes the fact that it possesses proprietary technology that is very attractive to the large pharmaceutical industry, and its partners can easily afford to compensate MorphoSys for its valuable expertise.
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LJ International: JCK Las Vegas Show Preview
Sally H. Wallick, CFA
May 24, 2006. LJ International (Nasdaq: JADE) will participate in the JCK jewelry show in Las Vegas in June. This show has been a growing order generator for the Company's core wholesale business in recent years: in 2005, the Company booked a record $20 million of orders at the show for delivery in the subsequent six months; in 2004 it booked $17 million of orders; and in 2003, $15 million of orders. We reiterate our Strong Speculative Buy rating on the Company's shares.
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Midway Gold Continues Consolidation of Spring Valley project
Mike Niehuser
May 24, 2006. Midway Gold Corp. (TSE.V:MDW) announced the acquisition of 12 additional claims at its Spring Valley project. These claims add to the prospective Gold Mountain target located between the company's Spring Valley resource and Coeur d'Alene Mines' (NYSE: CDE) Rochester mine. With increased interest by a major operator, steady progress consolidating its most prospective targets, and improved visibility on its goals, we are increasing our 12-month price target to $3.75 per share from $2.59 per share.
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George Forman Enterprises Strong Speculative Buy Rating In Update Coverage: Deal Flow To Replace Z-Trim If Necessary
Gerald F. LaKarnafeaux, CFA
May 23, 2006. We believe there is a potential of appreciation of 60% for Forman Enterprises (OTCBB: GFME) from the current market price within a 12-month time frame, based on the track record of Foreman and Holtzman. Our rating is a Strong Speculative Buy, with a 12-month target price of $5.50 per share, a slight a reduction from our previous target of $6.00. On November 28, 2005, the Company entered into a preliminary letter of agreement with Circle Group Holdings (Circle), a company that owns the exclusive rights to the product Z-TrimTM. The final agreement with Circle was extended several times and the definitive agreement was to have become effective on April 28, 2006. In a surprising turn of events (in Foreman's opinion), the document executed by Circle differed materially from the November 28 preliminary agreement. The differences were described by Foreman's attorney in a letter dated May 3, 2006. The attorney's letter states that litigation is inevitable if Circle maintains its position. The Z-Trim transaction is now problematic. However, based on our observation of the Company's deal flow, we believe that if the Z-Trim agreement falls by the wayside, as now seems very likely, another candidate should be forthcoming.
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Ampex Corporation (Nasdaq: AMPX) Notes from Ampex's Annual Meetng. Strong Buy Rating Reiterated.
Richard W. West, CFA
May 23, 2006. Management's comments in response to questions by concerned stockholders covered the status of the Eastman Koday lawsuit, the Data Systems business, the overall expectations for the licensing business, and the pension liabilities. Based on our assesment of the potential future royalties and successful licensing of additional patents for digital still cameras, camcorders and camera-cell phones, we continue to rate the stock a Strong Buy
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Cadence Resources (OTCBB: CDNR) Wins AMEX Listing With New Name (Aurora Oil & Gas), Ticker (AOG)
Richard R. Wolfe, CFA
May 23, 2006. On May 23, 2006, Aurora Oil & Gas Corporation, previously trading under the name of Cadence Resources, Inc., announced that beginning May 24th it will trade on the American Stock Exchange (AMEX) under the name of Aurora Oil and Gas and with new ticker AOG (old ticker was CDNR). We have a BUY rating and $8.23 target price on AOG shares.
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Biophan Technologies (OTCBB: BIPH) Raises $2.0 million capital through call upon SBI Brightline XI, LLC to purchase 1.0 million shares.
Richard W. West, CFA
May 23, 2006. Biophan Technologies Inc. raises $2.0 million in new capital through sale of 1.0 million shaes of common stock at $2.00 per share. The sale of stock was made under the financing agreement with SBI Brightline XI, LLC,. This agreement provides for an additional 9.0 million shares of stock of future financing at prices ranging from $2.00 to $4.00 per share at the discretion of Biophan as to timing. This financing agreement insures a source of working capital for Biophan over the coming quarters. We reiterate our Speculative Buy Rating.
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Cap Rock Energy: Dutton Coverage Terminated As Company Is Acquired And Goes Private
Richard W. West, CFA
May 23, 2006. 
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Electric City Announces aggressive plan of acquisition and proposed financing.
Richard W. West, CFA
May 23, 2006. Electric City (AMEX: ELC) acquistion of Parke Industires and the proposed financing is a major step toward accomplishing its goal of focusing on commercial sales of its energy saving products through direct marketing. The acquisition and financing is an aggressive plan to set-up Electric City as a turnaround prospect. We maintin our Neutral Rating, pending the successful completion of the acquisition and financing.
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ELRON Electronic Industries (Nasdaq:ELRN): Portfolio Company Update, Wavion 37.8% held by Elron
Barry Raeburn
May 23, 2006. Wavion, 37.8% held by Elron, announced today the availability of its newly developed metro-scale wireless access point. The company has been developing a leading-edge solution for next-generation broadband wireless communication devices focusing on metropolitan and municipality deployments. Wavion delivers a wireless network switch with dramatically increased capacity and range compared to product offerings currently in the market.
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National Coal (Nasdaq: NCOC) 2006 First-Quarter Results; Full Update Forthcoming
Richard R. Wolfe, CFA
May 22, 2006. On May 19, 2006, NCOC filed results for the quarter ended March 31, 2006. Our preliminary review (full quarterly update due out shortly) indicates that third-party coal purchases resulted in a temporary erosion of cash flow during the quarter; however, the outlook over the longer term continues to be one of strong prospects for production growth. We have a BUY rating and $14.50 target price on NCOC.
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Aurora Oil & Gas Reports First-Quarter 2006 Results
Richard R. Wolfe, CFA
May 21, 2006. On May 18, 2006, Aurora Oil & Gas Corporation, currently trading under the name of Cadence Resources, Inc. (OTCBB: CDNR), filed results for the quarter ended March 31, 2006, the first quarterly report after the Company's conversion to a December 31st fiscal year. Our preliminary review indicates that Aurora's production growth, though short of our estimate, continued at a rapid pace. Although the Company again reported a quarterly net loss, EBITDA continued to be positive and continued a growth trend that began in the third quarter of 2005. We have a BUY rating and $8.23 target price on CDNR shares.
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Aurora Oil & Gas Adds to Michigan Antrim Shale Position
Richard R. Wolfe, CFA
May 19, 2006. Aurora (OTCBB: CDNR) announced an agreement to add approximately 5,000 acres to its core position in the Michigan Antrim Shale play. The transaction should increase Aurora's natural gas production by 500 Mcf and add 10 billion cubic feet to proved reserves. The new acreage comes with several drilling permits and has over five miles of sales pipeline with gas processing infrastructure, enabling the Company to expand its development drilling program. Separately, Aurora has also initiated two new projects on its existing Antrim Shale acreage base. These involve 34 wells, 12 of which were completed in May and are in the dewatering phase. We believe that the Company is likely to exceed its goal of reaching 100 Bcfe of proved reserves by mid-year 2006. We reaffirm our BUY rating and $8.23 target price on shares of Aurora Oil & Gas Corp.
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NutraCea: Highlights of Conference Call; Q1 Revenues Up 723%; Major Expansion of Capacity
Gerald F. LaKarnafeaux, CFA
May 19, 2006. The following paragraphs are high lights of the NutraCea (OTCBB: NTRZ) conference call of 5/16/06. For the quarter ending March 31, 2006 the Company reported revenues of $3.78 million compared to the prior year comparable quarter of $459,314, an increase of 723%. A covenant of the Series C preferred calls for the Company to expedite the listing on NASDAQ. We continue to rate the stock as a Strong Buy and are maintaining a twelve-month target price of $1.80 per share.
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Pacific Ethanol Shares Pull Back 32% from May 11 High; Upwardly Revised EPS Estimates Assume Modest Increase in Ethanol Prices Vs. Previous Estimate; 12-Month Target Price Raised to $35; Rating Raised to Speculative Buy
Paul J. Resnik, CFA
May 19, 2006. Pacific Ethanol Inc.'s (Nasdaq: PEIX) shares have pulled back over 30% amidst a wave of profit-taking and in environment of valid and, in our judgment, not-so-valid concerns. Based on higher earnings projections which are based on more favorable ethanol price assumptions (although still lower than current levels), we are raising our earnings estimates for Pacific Ethanol. Accordingly, we are raising our 12-month price target to $35 and our investment rating from Neutral to Speculative Buy. Institutions who are clients of Dutton Institutional Services may hear Paul Resnik discuss the ethanol industry and the relative company valuations on a May 18th recorded conference call available on the institutional site.
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Clearant Maintained At Speculative Buy Rating In Update Coverage; First Quarter Results Highlighted By A 148% Year-over-year Increase Tn Licensing And Service Fee Revenue
Sally H. Wallick, CFA
May 18, 2006. Clearant's (OTCBB: CLRI) proprietary technology, the CLEARANT PROCESS®, uses gamma irradiation to sterilize biological products. Currently, it is the only commercially available technology that inactivates all known infection-transmitting pathogens in biological products already sealed in their final packaging without affecting the functional integrity of the treated material. Clearant's first quarter results were highlighted by a 148% year-over-year increase in licensing and service fee revenue, while the period's loss was $0.06 per share, well below last year's $0.71 per share loss and in line with our estimate. Thus far, 2006 has been an active period for announcements. We reiterate our Speculative Buy rating on Clearant common stock. We believe that the unique characteristics of Clearant's technology make it a compelling treatment option, strengthening the Company's competitive position and enhancing its long-term growth prospects. We are encouraged by the commercial and financial progress Clearant has made; the growing acceptance of the CLEARANT PROCESS in the marketplace; and management's aggressive efforts to gain share in existing and new markets. In addition, we believe that regulatory changes effective May 2005, which require that tissue suppliers validate sterility claims, could boost demand for the CLEARANT PROCESS long term.
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Forgent Networks Strong Buy Rating Maintained; Potential For Substantial Settlements in 2006 And 2007
Richard W. West, CFA
May 18, 2006. At current price levels, we believe an investment in Forgent Networks (Nasdaq; FORG) presents minimal downside risk and a most attractive upside potential. Forgent's aggressive and, thus far, successful program of licensing its intellectual property continues to result in the licensing of additional companies for its United States Patent No. 4,698,672 (672), with Forgent having licensed the '672 Patent to 56 companies that include a wide variety of businesses, and recorded revenue of over $106.8 million in license fees. We discuss Forgent's Markman hearing for the '672 Patent litigation and the Markman hearing for the '746 Patent litigation now scheduled for July 2006. Considering the possible additional royalty fees that Forgent may receive before the trial dates in the coming quarters, and assuming a possible judgment of $100.0 to $200.0 million from the '672 Patent litigation, and a possible judgment of $50.0 million to $100.0 million from the '746 Patent litigation, we believe that our price target of $5.00 per share or a market valuation of $125.0 million, is a conservative target. At current price levels, with a market capitalization of approximately $34.5 million, we believe an investment in Forgent presents minimal downside risk and a most attractive upside potential. We reiterate our Strong Buy rating and our 12-month price target of $5.00 per share.
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Memry Rating Raised To Buy In Update Coverage; Sparkling Third Quarter Results
William R. Prather, RPh, MD
May 18, 2006. Memry Corporation (AMEX: MRY) reported sparkling third quarter results on May 4, 2006. Revenues of approximately $14 million exceeded our estimate by over 6.5% and a reported EPS of $0.05 was more than double our estimate of $0.02. The primary catalyst for such a strong quarter was growth in the Company's Putnam Polymer division (Putnam) whose revenues grew approximately 35% over Q3-05 revenues to approximately $4.1 million. Memry acquired Putnam in Q2-05. Revenues from the Company's Nitinol division grew approximately 2.5% over Q3-05 to approximately $9.9 million. Based on our assumption that the acquisition of Memry's Putnam division is proving successful, we have raised our FY2006 and FY2007 revenue and earnings estimates. On a price/sales comparison, we believe the Company is significantly undervalued. Based on what we believe to be an appropriate earnings multiple of 30, we have revised our investment recommendation from Neutral to BUY with a 12-month price target of $4.50.
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LESCO: First Quarter Results Come Up a Bit Short of Estimates; Maintaining Full Year 2006 Estimates and Reiterating Buy Recommendation and $21.20 Price Target
Paul J. Resnik, CFA
May 18, 2006. While LESCO Inc.'s (NASDAQ: LSCO) first quarter results, reported on April 28, came up a bit short both with regard to revenues and profitability, we do not believe this normally unprofitable, low sales period need be viewed as a precursor for the full year. We continue to be hopeful that the Company's repositioning efforts will enable higher levels of sales growth and profitability in coming quarters. At this time, we are maintaining our full year 2006 estimates (initiated in the Research Note dated March 9, 2006) of revenues of $623.1 million and EPS of $0.89. Our 12-month price target remains $21.20 and our rating on the stock remains Buy. A more detailed review of the first quarter and updated projections for the remainder of 2006 and 2007 will be provided in our Update Report which will be issued in early June.
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Guideline: Sees Solid Growth in Revenue and EBITDA and Achieves Our EPS Expectation - Reiterate BUY
David Riedel
May 17, 2006. Guideline (OTCBB: GDLN), a national provider of outsourced business information services, posted strong results for the quarter ended March 31, 2006 exceeding our revenue and operating profit expectations and achieving our EPS estimate. Guideline remains on solid financial footing and we believe that the company is doing a good job managing their growth, both organic and through acquisition. We reiterate our $2.40 price target and Strong Buy rating.
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NutraCea: Private Placement of Convertible Preffered.
Gerald F. LaKarnafeaux, CFA
May 17, 2006. NutraCea (OTCBB: NTRZ) raises $17.6 million in a private placement of series C convertible preferred stock. The common stock of NTRZ is rated as a Strong Buy.
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Pacific Ethanol Reports First Quarter Results; Current Neutral Rating Maintained Within Framework of Positive Long-Term Outlook
Paul J. Resnik, CFA
May 17, 2006. Pacific Ethanol Inc. (NASDAQ: PEIX) reported first quarter results yesterday. Revenues, derived from the Kinergy Marketing operation, were $38.2 million, gross profit was $2.3 million and net loss was $611,763. We will provide an updated earnings model for Pacific Ethanol, which will include a new plant construction timeline (somewhat stretched out but with all five proposed plants operating by year-end 2008), a higher ethanol price assumption, and a modestly upwardly revised shares outstanding figure, in our upcoming Update Report on the Company. We believe Pacific Ethanol's attractive geographic placement of plants, established infrastructure for marketing its output, and strong financial base will enable the Company to fully participate in the anticipated rapid growth of the ethanol market. However, based on an eventual fully diluted 43.2 million common share count and yesterday's closing share price of $36.65, the Company has a current equity market value of $1.58 billion. We believe this figure adequately values the Company based on our current projections and we are maintaining our Neutral rating on the shares. We do believe that as the Company executes its announced expansion plans and as it begins to identify new potential avenues for growth, the shares could provide the opportunity for significant capital appreciation over the longer term.
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Paulson Capital: Reports First Quarter FY2006 Results
Richard W. West, CFA
May 17, 2006. Paulson's (Nasdaq: PLCC) first quarter was impacted by the weak stock market. The loss in investment income reslulted in negative revnue. However, with the Coporate Finance deal that was completed in the second quarter and the additonal deals to be completed over the balance of FY2006, we are not concerned. We reiterate our Strong Buy Rating.
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TASA Announces joint venture with RALLY! Education to develop an instructional assessment product
Sally H. Wallick, CFA
May 17, 2006. Touchstone announced a joint venture with RALLY! Education to develop an instructional assessment product. The new Web-based product line, TestPOWER.com(TM), will allow teachers to quickly and accurately identify learning strengths and weaknesses. We consider this joint venture a positive development for Touchstone because it: (1) takes the Company into formative assessment, a new classroom-based educational arena; (2) builds on ADI's strength in Web-based products; and (3) strengthens the Company's relationship with RALLY! Education, a relationship that we believe has the potential for expansion in the future. We reiterate our Buy rating on Touchstone's shares.
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Verticalnet: Ongoing concerns about Listing and Financing - Downgrade to Neutral
David Riedel
May 17, 2006. Verticalnet (Nasdaq: VERT), a national provider of supply management solutions, recently announced results for the March quarter and announced they have signed an agreement for additional debt financing. While we remain enthusiastic about the company's products and services, we are concerned about the company's ability to finance its growth and from an equity investment perspective are concerned that the company will be de-listed. We downgrade our rating to Neutral.
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Maine & Maritimes Speculative Buy Rating In Initiating Coverage; Holding Company for Maine Public Service Company
Sally H. Wallick, CFA
May 16, 2006. Maine & Maritimes (AMEX: MAM) is a holding company for Maine Public Service Company (MPS), a regulated electric transmission and distribution utility serving much of northern Maine, and unregulated businesses, including The Maricor Group (TMG), Maricor Properties Ltd (MPL), and Maricor Technologies, Inc. (MTI). In mid 2003, with the regulated business facing a declining revenue base, diminishing regulatory assets, and an economically lagging service area, Maine & Maritimes formed the holding company structure and developed a strategy for sustainable growth based on the creation of unregulated businesses perceived to have above-average long-term prospects for revenue growth and profitability. Following disappointing results in 2005, due to higher-than-expected costs at MPS and greater-than-anticipated losses at less mature unregulated businesses, we expect earnings to begin to rebound by the end of 2006 as a result of cost control efforts, rate increases at MPS, and stronger performance at the unregulated businesses. We project that unregulated businesses will be growing earnings contributors and value creators over the next three to five years and, at the same time, that MPS's earnings will recover from recent periods' depressed levels. We believe that Maine & Maritimes' valuation is attractive on a number of measures: its shares currently trade at roughly a 50% discount to book value per share and we estimate the Company's worth at approximately $22--$26 per share on a sum-of-the-parts basis.
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Nutrition 21 Strong Buy Rating Reiterated in Update; Price Target Raised to $3.30;
William R. Prather, RPh, MD
May 16, 2006.  We believe Nutrition 21 (NASDAQ: NXXI) is evolving from an ingredients supplier to a consumer health products company and has been successful in aggressively pursuing their commercialization efforts for Chromax, the first branded product line of chromium picolinate, and Diachrome. Recent announcements of N21's relationships with mass retailers and drug store chains combined with our review of their first formal investor presentation at the recent investor conference solidifies our belief in the Company's product line and their marketing and sales strategy. We are increasing our revenue and earnings estimates, reiterating our Strong Buy rating, and raising our price target to $3.30.
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21st Century Insurance: Lowering Rating To Neutral As Company Suspends 2006 Guidance
Richard W. West, CFA
May 16, 2006. 21st Century (Nasdaq: TCHC) suspended guidance for FY2006 due to higher cost of reinsurance. The Company files for a 49% rate increase for its homeowners line of business. We are lowering our rating to Neutral
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Biophan Technologies, Inc. Reports Results for FY2/28/2006
Richard W. West, CFA
May 16, 2006. Biophan (OTCBB: BIPH) revenue in FY2/28/2006, first meaningful revenue since inception. Revenue sources from from development payments, license fees, and consulting fees in Biophan Europe. Balance sheet reveals need for capital, but existing agreement with SBI Brightline XI, LLC, should provide necessary capital for next 12 months. For a developmental company, we believe Biophan has positioned its technologies well in several billion-dollar markets. We reiterate our Speculative Buy Rating and the 12-month price target of $3.00 per share.
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Electric City: Reports Q1 Results; Lowering Rating To Neutral
Richard W. West, CFA
May 16, 2006. Electric City's (AMEX: ELC) results in first-quarter 2006 cause us to lower our rating to Neutral. The Company is undergong a liquidity crisis and needs to raise capital and to increase revenue from existing products.
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Elron Electronic Industries Ltd. Reports Q1 Results, No Surprises
Barry Raeburn
May 16, 2006. Elron Electronic Industries Ltd. (Nasdaq: ELRN) today reported a net loss of $3.5 million, or $0.12 per share, for the first quarter of 2006, compared to a net loss of $5.1 million, or $0.17 per share, in the first quarter of 2005. Elron's net loss in the first quarter of each of 2006 and 2005 resulted from Elron's share in the net losses of its group companies. This is the normal expectation as Elron is largely an investment holding company. The company ended the quarter with $128.9 million in cash. Shareholders' equity at March 31, 2006, was approximately $297.6 million, representing approximately 86% of Elron's total assets. We maintain our Strong Buy rating and 12-month price target of $15.
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HydroGen: First Quarter Review, Financing Update
Sally H. Wallick, CFA
May 16, 2006. HydroGen (OTCBB: HYDG) reported first quarter revenue of $49,433 and an operating loss of $1.3 million or $0.17 per share. HydroGen is a development-stage company. Therefore, we do not believe that current results reflect its long-term potential. HydroGen's quarter-end cash and equivalents totaled $7.6 million and, on May 15, 2006, the Company announced the closing of a $25.8 million (gross) private placement. Therefore, we believe that it has sufficient capital to aggressively pursue its business plan to commercialize its fuel cell technology. We reiterate our Speculative Buy rating on HydroGen's shares.
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NutraCea (OTCBB: NTRZ) Announces Private Placement
Gerald F. LaKarnafeaux, CFA
May 16, 2006. NutraCea announced that the Company has privately placed with accredited investors $17,560,000 of Series C convertible preferred stock and five-year warrants to purchase 10,329,412 shares of common stock at $1.35 per share. The Series C preferred issue is convertible into 20,650,000 shares of common stock. The net proceeds of $16,180,000 will be used for working capital and the funding of production capacity expansion.
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O2 Diesel: First Quarter Review.
Sally H. Wallick, CFA
May 16, 2006. O2Diesel (AMEX: OTD) reported first quarter revenue of $50,872, up from $15,244 last year, and an operating loss of $0.04 per share (before deemed dividend to preferred shareholders), versus a $0.06 per share loss a year ago. Year to date in 2006, O2Diesel has taken important steps toward commercializing its products and raising capital. It shipped an initial bulk order of its proprietary additive to partners in Australia, announced a product development contract with the Department of Defense (DoD); signed a memorandum of understanding with Clark County, Las Vegas, Nevada to test the Company's ethanol/diesel fuel blend; added new sponsors for the Company's CityHome (TM) program, and raised $6.5 million from private placements. We rate O2Diesel common Speculative Buy.
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PFSWeb: March Quarter Revenues Above Our Estimate; eCOST losses Below Our Expectation.
David P. Soetebier, CFA
May 16, 2006. PFSweb (Nasdaq: PFSW) reported results for its March 2006 quarter with revenues for its traditional services above our expectations. The results were achieved with a pickup in special projects (disappointing in recent quarters) and lower losses at eCOST. The pipeline of new business is up to the $40 million area from $25 million at year-end for the Company's traditional Services business. PFSweb has refocused its marketing efforts after the disappointing 2005 year relative to signing new clients. Our estimated 2006 revenues remain $500 million for the combined companies (PFSweb and eCOST.com). We expect earnings at PFSweb's traditional business to be offset by losses at eCOST. We have a Strong Speculative Buy rating on PFSweb with a 12-month price target of $3.00.
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Elron to Host Conference Call to Discuss Q1 2006 Financial Results
Barry Raeburn
May 15, 2006. Elron Electronic Industries (Nasdaq: ELRN) will be releasing its first quarter fiscal year 2006 financial results on Tuesday, May 16, 2006. Elron will also be hosting a conference call that same day at 9:30am EDT. The company will review and discuss the quarterly financial results and recent investment activities.
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Joystar: First-Quarter Results Reveal Strong Growth In Revenue And Gross Travel Bookings With Improvement In Bottom Line; Strong Speculative Buy Rating Reiterated
Richard W. West, CFA
May 15, 2006. Joystar's (OTCBB: JYSR) common stock underwent a roller coaster day on Friday, May 12, 2006. A competitor in the on-line booking arena, Expedia (NASDAQNM-EXPE -$14.51), was sold down over 25% in response to weaker than expected first-quarter 2006 results, and the general stock market sell off resulted in Joystar's common stock selling down to an intra-day low of $0.89 before recovering to close the day at $1.10, up $0.03 on 298,000 share volume. Considering the positive results first-quarter results reported by Joystar, we are quite comfortable to reiterate our Strong Speculative Buy Rating and a 12-month price target of $1.70.
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LJ International: 1Q Revenue Up 39%; EPS In Line With Expectations; Strong Speculative Buy Maintained.
Sally H. Wallick, CFA
May 15, 2006. LJ International (Nasdaq: JADE) first quarter revenue totaled $24.2 million, up 38.5% year over year and well ahead of our estimate, as well as management's guidance. Earnings per share of $0.02 were in line with expectations. Both the retail and wholesale divisions contributed to top-line growth. Management projects second quarter revenue growth of 21%-26% to $23-$24 million and earnings per share of $0.02, flat year over year. The guidance is in line with our estimates. Therefore, we are maintaining our quarterly and annual earnings projections for LJI. We reiterate our Strong Speculative Buy rating on the Company's shares.
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Medivation, Inc. (AMEX: MDV) Medivation Reports First Quarter Results; Reiterate Strong Speculative Buy Rating
Wayne M. Lottinville, CFA
May 15, 2006. Medivation, Inc. (AMEX: MDV) reported a first quarter net loss of $2.8 million. The loss was 51% greater than the $1.9 million loss for the same quarter a year earlier and 33% more than the $2.1 million sequential loss recorded in the fourth quarter of 2005. Medivation ended the quarter with $9.8 million in cash equivalents and short-term investments. At the end of the quarter, Medivation had $9.8 million in cash equivalents and short-term investments. Medivation recently filed a shelf registration with the SEC to sell 3 million shares that is expected to raise $15 million or more. Results from Medivation's Phase 2 study in Alzheimer's disease patients in Russia are expected to be available in 3Q2006. A Phase 1-2a Huntington's disease study could before yearend, and a Phase 1-2a clinical study for the treatment of hormone-refractory prostate cancer is planned for the first half of 2007.
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Provectus Preliminary Phase 1 Metastatic Melanoma Clinical Trial Results Positive; Reiterate Strong Speculative Buy Rating
Wayne M. Lottinville, CFA
May 15, 2006. Provectus Pharmaceuticals, Inc. (OTCBB: PVCT) announced results for a second group of subjects treated in the Company's Phase 1 clinical trial for ablation of metastatic melanoma. Treatment was reportedly well tolerated with no evidence of systemic or serious local side effects. Most subjects exhibited evidence of efficacy, ranging from tumor shrinkage to complete ablation. Several also exhibited subsequent shrinkage of untreated tumors, a response characteristic of the "bystander effect." Provectus has now expanded the scope of the study to include a third group of six to eight subjects, some with Stage IV (those who have distant metastases), who will receive treatment dosages injected in up to 20 melanoma lesions with larger maximum lesion diameters than treated to date. These changes should allow the Company to further assess the performance of Provectus and more strongly validate the anticipated Phase 2/3 study design parameters where all accessible lesions are expected to be treated.
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Provectus: Reports Sequentially Decreasing Loss; Reiterate Strong Speculative Buy Rating
Wayne M. Lottinville, CFA
May 14, 2006. Provectus Pharmaceuticals, Inc. (OTCBB: PVCT) reported a first quarter net loss of $2.3 million. This Q1 loss was 68% greater than the $1.4 million loss for the same quarter a year earlier, but 53% less than the $4.9 million sequential loss recorded in the fourth quarter of 2005. Provectus ended the quarter with $6.2 million in cash equivalents and has sufficient cash to meet its clinical drug development needs until late 2007. Provectus' Phase 1 metastatic melanoma and breast carcinoma clinical trials are expected to be completed in mid-2006, and its Phase 2 psoriasis trial and its Phase 1 liver cancer trial are expected to begin in mid- to late 2006. We reiterate our Strong Speculative Buy rating on the Company's stock with an 18- to 24-month price target of $3.90 per share.
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Telkonet: Reports First Quarter Results; MST Launches "Quadruple Play" for Roosevelt Island Condo; Speculative Buy Rating Reiterated
Richard W. West, CFA
May 13, 2006. Telkonet Inc.'s (AMEX: TKO) revenue for the first quarter trended upward; however, Telkonet will need increased revenue to approach cash flow positive. The $4.3 million loss for the quarter put a strain on the cash position, and it appears, in the absence of increased revenue, with the current burn rate Telkonet will need additional financing. The day after releasing its first-quarter results in its 10Q, Telkonet announced in a press release on May 11, 2006, that MST launched the first bundled package of voice, video, Internet, and WiFi services on New York City's Roosevelt Island. While the potential for increased revenue and earnings for Telkonet in the coming quarters and years appears to be great, the first-quarter results gave only a hint of progress toward the necessary revenue mass for possible positive cash flow. We will monitor the progress by MST, Telkonet's rollout of new defense contracts, its continued penetration of the MDU and hospitality market, and the steps taken to raise additional capital. We reiterate our Speculative Buy rating and our $6.25 price target.
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AMPEX: Reports 1st Quarter FY2006 Results; New 52-Week Low Creates Buying Opportunity; Strong Buy Rating Reiterated
Richard W. West, CFA
May 11, 2006. Ampex's (Nasdaq: AMPX) first-quarter results reflect the continuing high cost of the Eastman Kodak litigation and the absence of any major one-time licensing settlements. Ampex expects license revenue from digital camcorders to increase materially from current running royalty levels, since they believe that several of their patents are used in these products. Such payments are expected to begin being reported in the third-quarter 2006. As for the litigation with Eastman Kodak, the Markman Hearing is scheduled for June 16, 2006, and a trial date is scheduled for December 2006.At the current depressed market price, Ampex's common stock market value is approximately $60.0 million and is recognizing the worst possible outcomes of the various patent negotiations and litigations that are in process, while apparently ignoring the possible positives.
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Clearant: First Quarter Earnings Review
Sally H. Wallick, CFA
May 11, 2006. Clearant's (OTCBB: CLRI) first quarter results were highlighted by a 148% year-over-year increase in licensing and service fee revenue, while the period's loss was $0.06 per share, well below last year's $0.71 per share loss and in line with our estimate. Thus far in 2006, Clearant has announced promising new strategies to drive revenue growth and boost market share. We reiterate our Speculative Buy rating on Clearant's shares.
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International Barrier Technology: Reports Excellent Q3
Gerald F. LaKarnafeaux, CFA
May 11, 2006. International Barrier (OTCBB: IBTGF) reported excellent results for the third quarter ending March 31, 2006. We discuss highlights of the quarterly results. These results were achieved without the benefit of the new production line, which will not be making a material contribution until the first quarter of the 2007 fiscal year.
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Internet Gold: First Reaction to 1Q 2006 Results, Reiterate BUY and Price Target of $8
Rafael K. Kapelinski
May 11, 2006. Internet Gold (Nasdaq: IGLD) has posted better-than-expected 1Q 2006 revenues while EPS was in line. Our current 2006E estimates will clearly need to be upgraded following our conversation with the management later on today: we believe our revenues estimates understate the growth in the telephony business, while the general cost estimate is clearly too high. We maintain our Buy recommendation and price target of US$ 8.
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Lantronix. Fiscal Third Quarter Results In-line With Our Estimates. Target Price Raised On Expectation of Continued Growth.
David P. Soetebier, CFA
May 11, 2006. Lantronix (Nasdaq: LTRX) recorded revenues of $13.1 million for its fiscal third quarter ended March 31, 2006, an increase of 6.2% from the same period in fiscal 2005 and the highest quarterly revenue in sixteen quarters. Earnings per share came in at $0.01 per share versus our breakeven estimate with the positive contribution reflecting a litigation settlement.Our preliminary June 2008 estimate is $0.19 per share. A multiple of 25X our fiscal 2008 estimate is $4.75. However, our FY 2008 estimate is aggressive and assumes acceleration in M2M market growth. Investors can't be expected to value LTRX at that level until more evidence in an acceleration in market growth is seen in our opinion. Consequently we are using a 12-month target of $3.25. Relative to the total available market of $12 billion, Lantronix's market capitalization would be $192 million (59 million shares at $3.25).
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Wave Systems: March Quarter Results
David P. Soetebier, CFA
May 11, 2006. Wave Systems (Nasdaq: QAVX) had total revenues of $493,000 for its March 2006 quarter compared with $78,000 reported for the year earlier quarter and up from the $348,000 reported in the December 2005 quarter. However, license revenues were down sequentially to $308,000 in the March 2006 quarter from $335,000 three months ago. Typically, sales will improve sequentially in an emerging growth market so the decline is disappointing. Our new estimate is that Wave will achieve positive cash flow late in the first half of 2007. We had expected positive cash flow in this year's fourth quarter. Our new price target is $1.50 down from $2.00 (more shares and a smaller market). Hopefully, sales of the Embassy Suite software will surprise us on the upside. Gross margins on software sales are typically well over 50% so an acceleration is suite sales could dramatically change our revenue expectations. We continue to believe Wave offers strong speculative appeal with a 12-month target of $1.50.
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Clearant: Initiates Direct Sales Strategy and Enters Supplier Agreement.
Sally H. Wallick, CFA
May 10, 2006. Clearant (OTCBB: CLRI) announced a new direct sales strategy, including an agreement to access spinal allografts as a processor's representative in order to accelerate demand for tissue treated with the Clearant Process(R). The Company's management held a conference call with investors to review the Company's new sales and marketing strategy. In addition, two leading orthopedic surgeons discussed the benefits of Clearant's sterilization technology on the call. As a processor's representative, Clearant will market Clearant Process-treated tissue directly to users, including surgeons, clinics and hospitals. We believe that the advantages of direct selling include the opportunity to educate surgeons about the benefits of Clearant's sterilization process and, therefore, to more directly drive sales and boost market share. We believe that the unique characteristics of Clearant's technology make it a compelling sterilization option. We rate Clearant's shares Speculative Buy.
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INX: First Quarter 2006 Results With Revenues Beating Our Estimate But Earnings Less Than Our Projection
David P. Soetebier, CFA
May 10, 2006. INX (Nasdaq: INXI) revenue at $30.8 million for the first quarter ended March 31, 2006 came in slightly higher than our $29 million estimate and up year over year (YoY) and also up sequentially. The company's expansion program negatively impacted profitability for the quarter and caused a shortfall versus our projection. We had estimated a loss of $0.05 versus final results that came in with a $0.09 loss. However, on a longer term basis the accelerated expansion program is a positive as INX now has sales associates in New England, Florida and the New Orleans area. For the full 2006-year we estimate revenue growth of 20.5% to $146.5 million and earnings per share of $0.10 reduced from our estimate of $0.15 to $0.20. In addition, we are reviewing our 2007 estimate. We are maintaining our Strong Buy rating and our target of $10.00.
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Midway Gold Corp. (CDNX: MDW) Reported That Barrick Gold Corp. Taking Two Million of the 3.75 million Shares of the Company's Recent Equity Placement
Mike Niehuser
May 10, 2006. Midway Gold Corp. (CDNX: MDW) reported that Barrick Gold Corp. (NYSE: ABX) will be taking two million of the 3.75 million shares of the company's recent equity placement. Barrick's shares were acquired at C$1.80 per share, raising approximately C$3,600,000 (there is also an option to purchase another million shares at C$2.70 per share). The purchase by Barrick results in a 6% undiluted interest in MDW which could be increased if the warrants are exercised.We believe the investment by Barrick in Midway is an indicator of the strong development potential of the company's projects in Nevada. In view of this development, we are reviewing our price target. Our rating remains Speculative Buy.
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NutraCea: Broadened Letter of Intent with Pronaca
Gerald F. LaKarnafeaux, CFA
May 10, 2006. NutraCea (OTCBB: NTRZ) announced a broadened letter of intent with Pronaca, the largest food company and the largest employer in Equador. The modified Supply and Marketing Agreement provides for a five year alliance.
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(Corrected) HydroGen Speculative Buy Rating In Initiating Coverage; Developer Of Multi-Megawatt Hydrogen-Powered Phosphoric Acid Fuel Cell Systems
Sally H. Wallick, CFA
May 09, 2006. HydroGen (OTCBB: HYDG) is a developer of multi-megawatt hydrogen-powered phosphoric acid fuel cell systems utilizing technology acquired from Westinghouse Corporation. Fuel cells are a proven technology with a number of important advantages relative to fossil-fuel based electricity generators: they are combustion-less, emissions-free, quiet, have few moving parts and are extremely energy efficient. HydroGen is targeting markets for power stations of over two megawatts (MW) not currently served by other fuel cell manufacturers. Its technology is well developed and appears to have the potential for relatively rapid commercialization. As a result, we believe that the Company is well positioned to benefit from growing demand for clean distributed energy. In addition, we expect economies of scale resulting from volume production of large-scale systems, and manufacturing efficiencies arising from the unique air-cooled, "unbundled" characteristics of HydroGen's technology, to contribute to cost reductions and a competitive price. Management expects to receive the first contingent orders for HydroGen's power islands this year, and looks for the Company to turn cash flow positive between 2007 and 2008.
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(Corrected) Midway Gold Speculative Buy Rating In Initiating Coverage; Advancing Two Prospective Gold Deposits In Nevada
Mike Niehuser
May 09, 2006. Midway Gold Corp. (CDNX: MDW) is a junior gold exploration company. Midway is advancing two prospective gold deposits in Nevada. In addition to being located in one of the best political jurisdictions in the world to develop and operate a gold mine, it is advancing its projects during a period of sustained increases in the price of gold. This not only gives the opportunity for increasing the value of potential assets in the ground, but also increases the attractiveness of Midway as a takeover candidate by major operators. Many major mine operators have allowed their pipeline of future projects to become depleted during earlier periods of low metals prices. These large mine operators are coming under increasing pressure to locate gold resources. Midway's success depends upon its ability to redefine and expand its existing gold deposits into large and economically viable gold resources. Because the character and potential of the Company's deposits are now being recognized by the mining industry, we anticipate that awareness by the investment community should follow, and the Company's stock may have near-term above-average potential for appreciation.
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(Corrected) Touchstone Applied Sciences Rating Maintained At Buy; Our Fiscal 2006 Earnings Estimate Understates The Company's Underlying Earnings Power.
Sally H. Wallick, CFA
May 09, 2006. Touchstone (OTCBB: TASA) provides educational testing and assessment tools and services, mainly for primary- and secondary-school systems. During fiscal 2005 and continuing in fiscal 2006, Touchstone's business has changed in response to new customer needs and preferences arising partly from the federal government's No Child Left Behind (NCLB) legislation. It has made two acquisitions that expanded its service capabilities, strengthened its management team, bid on larger, more complex (and, potentially, more profitable) contracts that require a full array of services including printing, distribution, scanning and scoring, and strengthened its internal sales and marketing capabilities. While we believe these changes are necessary and have the potential to drive revenue and earnings growth long term, initially they have, at times, resulted in less-consistent business flows, margin pressures, higher costs and lower earnings, as reflected in recent quarterly results. Nevertheless, we believe that Touchstone has responded to the changing marketplace appropriately and taken steps to strengthen the Company's operating and competitive positions, which we expect to result in a reacceleration in earnings growth later in fiscal 2006 and beyond. As a result, we believe that our fiscal 2006 earnings estimate understates the Company's underlying earnings power. Therefore, we continue to rate the Company's shares as Buy.
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[Corrected] Pacific Ethanol Announces Construction to Begin on Oregon Ethanol Plant in 30 Days; Reiterates Plan to Complete 5 Ethanol Plants by Year-end 2008; Rating Remains Neutral
Paul J. Resnik, CFA
May 09, 2006. Pacific Ethanol, Inc. (Nasdaq: PEIX) today announced that it has received all necessary permits to begin construction on a 35 million gallon per year ethanol facility at the Port of Morrow, located on the Columbia River near Boardman, Oregon. The Company further stated that it expects to begin construction, which should take approximately 12 months, within the next 30 days. Importantly, Neil Koehler, CEO, again referred to the Company's "stated plan to construct five ethanol production facilities to serve the western United States by the end of 2008." We view both the Boardman announcement and the reiteration of the end of 2008 timetable for the completion of five plants as positive news, and we believe Pacific Ethanol has a solid strategy which includes the attractive geographic placement of plants, an established infrastructure for marketing its output, and a strong financial base. However, with the market capitalization based on the Company's fully diluted share count now over $1.7 billion, we believe a Neutral rating remains appropriate.
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(Corrected) Vita Food Products: Announces License Agreement with Anheuser-Busch
Gerald F. LaKarnafeaux, CFA
May 09, 2006. Vita Food Products (AMEX: VSF) announced that the Company under a licensing agreement with Anheuser-Busch will produce and distribute on an exclusive basis a new line of barbecue sauces, wing sauces and a baste. The stock of VSF increased by $0.44 per share or 12%. We are maintaining our Speculative Buy rating based on the strong sales performance in the first quarter.
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EasyLink Speculative Buy Rating Maintained; Reason To Believe That The Long-Awaited Turnaround For The Company Is Now Beginning
Paul J. Resnik, CFA
May 08, 2006. The year 2005 was a difficult one for EasyLink (Nasdaq: EASY). Revenues, reflecting continued shrinkage in Transaction Delivery Services (TDS) revenue and a temporary interruption in the growth of the Transaction Management Services (TMS) business, fell to $18.5 million in the fourth quarter. The stock responded to these difficulties by dropping almost 40% during the year, from $1.44 to $0.89, and has continued under pressure in 2006. Still, we believe the TMS business can form the basis of future growth and that the combination of improving product offerings and EasyLink's extensive customer base which includes over 400 of the Global 500, give the stock speculative appeal over the longer term. First quarter 2006 results and management guidance for the second quarter provided, in our judgment, reason to believe that the long-awaited turnaround for the Company is now beginning. Moreover, the successful completion of a $5.4 million common stock financing removes a significant concern for EasyLink shares. Although we believe EasyLink will likely fall slightly short of achieving a breakeven result for 2006, we have established a preliminary earnings per share estimate of $0.08 for 2007 and believe the shares can come to trade at 13 times this EPS level over the next 12 months. Accordingly, we now have a $1.04 price target for the shares and rating of Speculative Buy.
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Sunwin International Neutraceuticals: Strong Speculative Buy In Initiating Coverage; Focus on Calorie-free Natural Sweeteners, Traditional Chinese Medicine (TCM)-based Veterinary Medications
Stanley Ng
May 08, 2006. We are initiating coverage of Sunwin International Neutraceuticals, (OTCBB: SUWN) with a Strong Speculative Buy rating. The Company is principally engaged in the development, production and marketing of nutraceutical products, with a prime focus on calorie-free natural sweeteners, traditional Chinese medicine (TCM)-based veterinary medications and animal additives, and TCM-formula extracts for both human and animals. Most of these products are sold on a wholesale basis in the domestic market via a nationwide distribution network, as well as by exporting to overseas markets. In our opinion, the Company offers investors a good opportunity to invest in the huge and growing nutraceutical market, which comprises a wide variety of food and beverage products, dietary supplements and medications, as well as animal feeds and veterinary remedies. To strengthen its market position and to enhance its competitiveness, the Company is aggressively increasing its production capacity and marketing channels in North America for its stevioside, a calorie-free natural sweetener. Meanwhile, large capital expenditures to upgrade its production facilities to comply with the latest Good Manufacturing Practice (GMP) requirements introduced by the People's Republic of China (PRC) would enable it to capture greater market shares for its veterinary medicine and TCM products.
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Elron Electronic Industries: Oracle in Israel; Vote of Confidence Could Reduce Perceived Long-term Investment Risk of the Region
Barry Raeburn
May 08, 2006. The Oracle of Omaha's entry into the Israeli market at a time of international discontinuity should reduce international investment risk premiums and could reignite international focus on the positive business and technological developments of Israel, in our view. Over the next 2 years we look for Elron (Nasdaq: ELRN) to monetize numerous portfolio companies through various forms of exit transactions. The discount to Elron's NAV is significant and has widened to 18.5% from 16.5% in early September before the dividend distribution. Any risk reduction in the regional perception should be reflected in a narrowing of the NAV discount on Elron's share price. We maintain our Strong Buy rating and 12-month price target of $15.
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Vita Foods: Reports Significant Improvement
Gerald F. LaKarnafeaux, CFA
May 08, 2006. Vita Foods (AMEX: VSF) reported significant improvement in sales, operating income and net income in the first quarter. Management affirmed its earlier 2006 guidance. We continue to rate the stock as a Speculative Buy. We are increasing our target price to $4.00 per share.
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Clearant: Growth Strategy Conference Call Announced.
Sally H. Wallick, CFA
May 07, 2006. Clearant (OTCBB: CLRI) announced plans to host a conference call with investors on May 9 to launch a new sales and marketing strategy. It will feature the Company's Chief Executive Office and two orthopedic surgeons. We view it as very positive that management is developing new growth strategies and is taking a higher profile vis--vis the investment community by communicating those strategies directly to investors. Also, we believe that it will be very useful for investors to hear from surgeons able to address, based on hands-on experience, the effectiveness and potential of the CLEARANT PROCESS(TM).
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Pathmark Stores: Comment On A&P And Northeastern Retail Consolidation
Jonathan H. Ziegler, CFA
May 06, 2006. For those with a continuing interest in PTMK, a trade-periodical included the following announcement today: We pass it along because we deemed it to be relevant to Pathmark (Nasdaq; PTMK) and its shareholders.
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Quest Oil: Key Producing Property Restarted At Reduced Flow Rate And Shortened Well Life; Maintain Dutton AVOID Rating And Price Target Of $0.15 Per Share.
Richard R. Wolfe, CFA
May 06, 2006. In a May 4, 2006 press release, Quest Oil Corp. (OTCBB: QOIL) announced that it has restored production at its key property, the Acadia North 10-22 well. The well now flows at a reduced rate and indications are that more than 50% of proved reserves associated with the well have already been recovered. Based on this disclosure, we have updated our estimates of the Company's future net cash flows, and the results continue to indicate a target price of $0.15 per share. We therefore affirm our AVOID rating on QOIL shares.
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Smart & Final: Buy Rating Maintained in Update Coverage; Faces A Number of Positive Opportunities
Jonathan H. Ziegler, CFA
May 05, 2006. Smart & Final (NYSE: SMF) reported its first quarter -- 12-week period -- ended 26 March 2006 last Friday, and also announced they have retained Goldman Sachs & Co. for advice related to the possible disposition of the shares held by Casino Guichard - Perachon.S.A. (Groupe Casino). The results reported for the quarter were disappointing compared to the estimates we had in our model. Comparable store sales were 1.8% vs. our 3.0% estimate. There was some impact on comps from the self-cannibalization of the back-end loaded new store opening program which plopped many new stores down in existing markets. We also suspect -- although we have no confirmation -- that the three major supermarket chains, particularly Ralphs (Kroger -- KR) and Vons (Safeway - SWY) are recapturing sales losses from the southern California supermarket strike two years ago and, consequently, are making sales growth for Smart & Final stores more challenging. Furthermore, Company comparables have no benefit from (a) adding fuel centers; and (b) a new store growth program in recent years through 2004. The reported EPS of $0.08 vs. $0.11 in the first quarter of 2005 did not match our $0.14 estimate. We attribute this performance to the Company's status as an early-stage revitalized growth company. Because of the shortfall in the first quarter, we are revising our 2006 and 2007 estimate. We continue our Buy investment rating on Smart & Final shares because we believe it faces a number of positive opportunities
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Wave Systems: Signs License Agreement with Winbond
David P. Soetebier, CFA
May 05, 2006. Wave Systems (Nasdaq: WAVX) announced that it has signed a software licensing agreement with Winbond Electronic Corporation (WBEMF.pk - $3.02 - Nasdaq). Wave will receive a per-unit royalty based on Winbond's sales of products that are equipped with or include Wave's software technology.We consider this one of the more important developments we have seen at Wave in recent periods. Most personal computer motherboards are manufactured in Taiwan or other countries in that part of the world. Signing Winbond effectively provides a local supplier for the PC motherboard companies, which we believe will allow, Wave to gain market share.
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ImageWare Systems Speculative Buy Rating; Among Main Beneficiaries Of An Increasing Range Of Biometric Identifiers Being Integrated Into Both Contact-Based And Contactless Smart ID Cards
Rafael K. Kapelinski
May 04, 2006. We downgrade ImageWare Systems (AMEX: IW) to a Speculative Buy rating from a Buy rating but retain our price target of $3.25. Given the current share price, our price target implies a price/sales 2006e multiple of approximately 4.6x. We maintain our 2006 revenue forecast at $10.2 million and reduce our 2006 EPS estimated loss from $(0.43) to $(0.025), as we anticipate cost savings from the recent closing of the German subsidiary. In our view, the current valuation represents an attractive long-term entry point. We believe that ImageWare should be considered among the main beneficiaries of an increasing range of biometric identifiers being integrated into both contact-based and contactless smart ID cards. Over the past 12 months, the Company has transformed itself into a security system solution provider with superior biometric capability and a high software sales content.
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Medivation: Strong Speculative Buy Rating In Initiating Coverage
Wayne M. Lottinville, CFA
May 04, 2006. Medivation (AMEX: MDV) currently has three promising development programs, potential therapies to advance treatment results in the fights against Alzheimer's disease, Huntington's disease, and prostate cancer. In vitro and in vivo studies of all three show that they might ultimately prove to be better therapies than currently approved drugs. In addition, Medivation's lead candidate for treatment of Alzheimer's and Huntington's diseases has shown promising results when tested in humans and appears to be very safe and well tolerated. Significantly, it may have the potential to actually affect the underlying disease, which no current therapy is able to do. The Alzheimer's disease drug candidate is in a 183-patient Phase 2 clinical trial, which is expected to finish in 2006. The Huntington's disease and prostate cancer drug candidates are expected to enter Phase 1-2 clinical trials in 2006 and 2007, respectively. An investment in Medivation has a high level of risk. The task of successful drug development is costly, arduous, and prone to many misfortunes. That risk, however, is mitigated to a significant degree by three salient factors we discuss in our report.
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Provectus Pharmaceuticals: Initial Rating At Strong Speculative Buy; Treating Diseases Characterized by Cellular Over-replication
Wayne M. Lottinville, CFA
May 04, 2006. Provectus Pharmaceuticals (OTCBB: PVCT) is developing drug therapies to treat various cancers and psoriasis. The Company is an early-stage biopharmaceutical company that is developing an agent that, in preclinical and early clinical studies, has shown promise in treating diseases characterized by cellular over-replication. These diseases include cancers and chronic skin afflictions such as psoriasis and eczema. Decades of use have demonstrated that the active agent in Provectus' drug candidates, rose bengal disodium (Rose Bengal), is safe and nontoxic. Preclinical and early clinical data suggest that Rose Bengal has the potential to make significant therapeutic advances against cancer as discussed in our report. All of the markets addressed by Provectus' clinical development programs are large and underserved by current therapies. Successful progress in any one of the Company's programs for treatment of cancer or psoriasis could add $100 million or more to Provectus' market capitalization and more than double its stock price to $3.90 per share, our 18-month to 24-month target price.
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Seabridge Gold Reacquires 100% Interest in Kerr-Sulphurets Project; Reiterate Strong Buy Rating
Les W. Childress
May 04, 2006.  Seabridge Gold (AMEX: SA) has reacquired the 100% interest in the Kerr-Sulphurets project located in British Columbia, Canada from Falconbridge Limited through the purchase of Falconbridge's option to earn a 65% interest in the project. The purchase price consists of 200,000 Seabridge shares and up to a maximum two million "conditional" share purchase warrants which are exercisable by Falconbridge for five years at a strike price of Cdn$13.50 per share. The strike price roughly approximates the current Seabridge share price on Friday, April 28, 2006. For each new ounce of gold resource discovered at Kerr-Sulphurets, a warrant will be issued up to a maximum of two million. We think this deal is win--win for both companies. Falconbridge has a call on new gold ounces discovered at the project and is free to direct its attention to the exploration and production of base metals--its forte--at a time of exceptionally robust commodity prices and high demand. Seabridge gets a highly desirable project returned to it which contains a copper resource but which has excellent gold potential in the Mitchell zone. Additionally Seabridge has a call on the Falconbridge exploration team that knows the area and was involved in the drill-testing last year. Last year's drill test yielded gold-copper mineralization. We reiterate our Strong Buy recommendation for Seabridge shares.
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Wave Systyems: Closes on $4.8 Million Equity Financing
David P. Soetebier, CFA
May 04, 2006. Wave Systems (Nasdaq: WAVX) announced that it has agreed to sell 6,037,500 shares of its Class A common stock at a price of $0.80 per share for gross proceeds of $4,830,000. The sale was expected to be completed on Friday, May 5, 2006. Security Research Associates acted as placement agent in connection with the offering. We were pleased that Wave was able to get a higher price per share than its previous offering that was completed in December 2005. We continue to be disappointed that revenues have not improved to the point that Wave's need to raise funds from outside sources hasn't been reduced. The cash burn rate at Wave still appears to be about $1.5 million per month.
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Electric City: Speculative Buy Rating Maintained
Richard W. West, CFA
May 03, 2006. The new management that took charge in late January is moving quickly to alter the future direction of Electric City's (AMEX: ELC) business plan by focusing on the following areas discussed in the report. The length of time needed for development and deployment of EnergySaver units for the VNPP program and the revenue recognition policy for ComEd and PacificCorp. was graphically made clear with the recognition of only approximately $15,781 from these contracts. Electric City will continue to ship units under the ComEd program and the recent financing could accelerate the pace of these shipments. With the sale of Great Lakes, the focus on direct commercial sales of its EnergySaver products and the integration of MPG into its infrastructure, Electric City is undergoing a major reorganization. We have suspended our income model, pending future operating results so that we can see the trends in the direct sales, MPG revenue, and VNPP activity. At the current $0.50 level, the market capitalization of Electric City is approximately $29.0 million. We believe that at current levels, Electric City is receiving scant recognition for the potential of the future VNPP revenue and the potential revenue and earnings from MPG. Electric City's new management has its work cut out for itself, however, we believe the current valuation is recognizing only the negatives of past and is ignoring the positives of the future.
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21st Century Holding Reports Record First Quarter Results; Strong Buy Rating Reiterated; Price Target Raised to $26
Richard W. West, CFA
May 03, 2006. 21st Century Holding Co. (NASDAQ: TCHC) reported, on May 2, 2006, record results for first-quarter ended March 31, 2006. On a fully diluted EPS basis, 21st Century recorded $0.83 per share compared with $0.78 EPS for the first-quarter 2005, excluding the one-time sale income for $0.17 EPS. We believe record revenue and record net income from continuing operations validates 21st Century's business strategy. Their decisions to sell their agency business, eliminate mobile homes coverage, and decrease emphasis on auto insurance are paying off. We expect that the gains of the first quarter will continue through the balance of 2006. 21st Century is well on its way to meet management's guidance of $4.00 for FY2006, that is, if the hurricanes are kind to Florida this year. If not, the EPS would be reduced by approximately $0.55 to $0.60 per share per storm. Management indicated that they are in the throes of negotiations for updating their reinsurance policies and the outcome of these negotiations could mitigate hurricane losses for 21st Century. While there may be profit taking before the hurricane season, we reiterate our Strong Buy rating and are increasing our 12-month price target from $24.00 to 26.00 per share.
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Apex Silver Shares Drop 35% in Response to Developments in Bolivia
Les W. Childress
May 03, 2006. Apex Silver Mines Ltd. (AMEX: SIL) is currently and primarily a single project, single country story. Political risk insurance exists on about 30% of the capital cost of the San Cristobal silver-zinc-lead project in Bolivia. We have not been surprised by Bolivia's nationalization of its oil/gas industry, as the rumors and sentiment for this had been a topic before Evo Morales won the presidency recently. Nor have we been surprised by Bolivia's announcement of potential major mining law reform and the market's reaction. We discussed this topic in our Apex research report of November 8, 2005. Further, it would not be a surprise to see some short-term technical bounce; whether it can be sustained is unclear. Going forward Apex shares could experience increased volatility for a while as the risk has clearly increased. We have had no rating other than neutral and have had no target price. However, it seems only prudent to stay on the investment sidelines regarding the shares pending a project site review at San Cristobal and an on-site assessment of the political and economic environment in Bolivia as it relates to the long-term picture for Apex. By no means does this mean a change in our extremely bullish outlook for silver and the silver mining industry.
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DXP Enterprises Shares Rise Over 40% in 4 Days; Rating Revised from Strong Buy to Buy on Price Basis
Paul J. Resnik, CFA
May 03, 2006. May 3, 2006. DXP Enterprises Inc. shares have risen over 40% subsequent to the Company's after-the-close April 26 announcement of first quarter earnings of $0.44 (vs. $0.15), well above our $0.33 estimate. At this time, with the stock advancing above $50, we are downgrading from Strong Buy to Buy. A Strong Buy rating at Dutton Associates indicates 12-month projected upside of at least 40%; in the case of DXP that would now mean a target of over $70. A Buy rating indicates projected upside of at least 15%. We believe it is appropriate to maintain a Buy rating while we are reviewing our current $49 price target for the shares based on current market conditions and a reassessment of 2007 prospects. It should be noted that even a downgrade to Neutral would not mean "Sell." Rather, as it has in the past, a Neutral rating would mean that we believe investors seeking to participate in the long-term growth of DXP may be well-served to follow a strategy of accumulating on dips rather than chase recent strength.
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IntegraMed Posts Better than Expected First Quarter Results; Reiterate Strong Buy
David Riedel
May 03, 2006. IntegraMed America (NASDAQ: INMD), a leading provider of fertility services, reported strong results today for the first quarter of 2006. Though revenues were 10% below our expectations, margins were better than expected. Continued strong growth in FertilityDirect (especially in the Shared Risk Refund product) supported the high margins. EPS of $0.09 was slightly better that are expectation of $0.08. As the only listed play on fertility trends and a company showing strong revenue growth and impressive margin expansion, we believe IntegraMed is currently undervalued. The shares currently trade at 20 times our 2007 EPS estimates. We believe, however, that our earnings estimates will prove conservative as top line growth and margin expansion deliver above expectation earnings. We are maintaining our outlook for EPS of $0.40 for 2006 and $0.60 for 2007, as well as our Strong Buy rating and $15 price target.
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Gigabeam: Last Mile Solution; Strong Speculative Buy Rating
David Riedel
May 02, 2006. GigaBeam Corporation's (Nasdaq: GGBM) WiFiber(tm) wireless fiber technology allows enterprises and consumers to access fiber optic connections without the costs and delay of digging up the streets and laying additional fiber links. WiFiber™ is a wireless point-to-point link using highly reliable upper millimeter wave technology to wirelessly connect buildings and customers to the fiber optic backbone network. While technically complicated, the solution is in many ways simple, as well as being rapid, inexpensive and astounding. Gigabeam, we believe, offers investors an opportunity to participate in a solution which overcomes the regulatory, technical and market issues to provide customers with a solution to the thorny issue of 'last-mile' connections to fiber-optic networks. We expect the company to be profitable in 2007 with EPS of $.26 on revenues of $33 million.
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(CORRECTED) National Coal: Fourth Quarter and Target Price Raised
Richard R. Wolfe, CFA
May 02, 2006. National Coal Corp (Nasdaq: NC0C) filed 2005 results on April 12, 2006. Latest quarterly results are discussed in this note. We expect the release of NCC first-quarter 2006 results shortly. We are again increasing our 12-month price target for NCC, based on strengthening prospects for Eastern US coal producers. The Company's shares continue to be attractive from a valuation standpoint, despite a strong rally in the stock in the last 30 days that has seen a near-doubling in value. The coal industry outlook continues to be favorable, reinforced by substantially higher pricing for competing fuels and underpinned by firm prospects for continued energy demand growth.
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Clearant: Quarterly Results Previewed.
Sally H. Wallick, CFA
May 01, 2006. We expect Clearant (OTCBB: CLRI) to file its 1Q 10-Q some time during the next two weeks. As discussed in previous notes, the 1Q and early 2Q were active periods for Clearant during which it announced several strategies aimed at gaining market share and accelerating revenue growth. Our rating remains Speculative Buy.
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NetVision to Commence Merger Discussions
Barry Raeburn
May 01, 2006. Elron announced that NetVision (TASE:NTSN), 39% held by Elron, will be entering into merger discussions with Barak ITC. Barak, a long-distance phone carrier, has decided to examine a possible merger with Internet service provider NetVision. NetVision is one of Israel's largest Internet Service Providers (ISP). NetVision went public on the TASE in May 2005. The IPO valuation was $70 million; currently, the valuation is approximately $96 million.
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LJ International: Earnings Rreviewed. Strong Speculative Buy reiterated.
Sally H. Wallick, CFA
May 01, 2006. We expect LJ International (Nasdaq: JADE) to report 1Q 2006 results some time during the next two weeks. In conjunction with reporting 4Q 2005 earnings, the Company projected first quarter revenue of $21-22 million, up approximately 21%-26% from $17.4 million last year, and earnings per share of $0.02, flat year over year. We expect both the wholesale and retail divisions to contribute to first quarter revenue growth.
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O2Diesel: First Quarter Results Previewed.a
Sally H. Wallick, CFA
May 01, 2006. O2 Diesel (AMEX: OTC) first quarter results previewed. Progress made toward commercializing proprietary ethanol/diesel fuel blend and raising capital. Speculative Buy rating reiterated.
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Electric City: Receives Potential Delisting Notice From AMEX; Speculative Buy Reiterated
Richard W. West, CFA
April 30, 2006. On April 21, 2006, Electric City (AMEX: ELC) received notification from the American Stock Exchange that, based on an Exchange staff review of Electric City's SEC form 10-K, the stockholders' equity was below the requirements for continued listing on the Exchange. Electric City's new management has already taken steps to improve its financial situation, which we discuss. We believe that the price of Electric City's common stock is now recognizing only the negatives of the past and ignoring the possible positives of the future. We reiterate our Speculative Buy Rating and reaffirm our 12-month price target of $1.00 per share.
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FX Energy: Notes from IPAA Oil & Gas Symposium
Les W. Childress
April 29, 2006. FX Energy (Nasdaq: FXEN) candidly discussed the lessons learned from the disappointing commercial gas volumes found in their Sroda-4 well in Poland. The takeaway from FX's conference presentation was that Sroda was a huge learning tool for the Company. Despite the share price weakness, our long-term investment case remains in tact.
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(Corrected) Gastar Exploration, Ltd.: Notes From IPAA Oil & Gas Symposium
Les W. Childress
April 29, 2006. At the IPAA Gastar (AMEX: GST) provided an update on its exploration efforts, principally the East Texas area. Clearly the acreage in and around Gastar's Hilltop play is the primary focus of investor attention although Gastar's Australian CBM potential has recently developed traction from the results of previous tests. The significant takeaway from this Company presentation by CEO Russ Porter is twofold, which we discuss.We like the upside potential for Gastar and would not be surprised to see some asset rationalization take place for the Australian properties, which could give shareholders some incremental return. We continue to reiterate our BUY recommendation for the shares.
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Panhandle Royalty Company: Notes From IPAA Oil & Gas Symposium
Les W. Childress
April 29, 2006. Recently elected co-presidents Mike Coffman and Ben Hare jointly laid out their new strategy for Panhandle's future direction. We believe Panhandle Royalty has the balance sheet, management and contacts to realize its new strategy. With oil prices at record levels and likely to test the previous unadjusted high of $91/Bbl, we reiterate our Strong Buy recommendation driven by the change in strategy and the higher level of commodity prices for oil and gas.
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Trinity Biotech: Prospects For This Ireland-Based Diagnostic Products Company Are Very Favorable; Strong Buy Rating and $12 Price Target
Stephen L. Handley
April 28, 2006. We continue to believe that the prospects for Trinity Biotech (Nasdaq: TRIB), an Ireland-based diagnostic products company are very favorable. First quarter results, announced on April 27th, were in line with expectations although were not representative of growth and profitability we expect in subsequent quarters. The most impressive number in the quarter, in our opinion, was the 36.0% jump in operating profit, as operating margins widened from 6.8% to 7.9%. This is indicative of the significant profit turnaround now underway at the Company, and management is targeting operating margins to exceed 12% by year-end. We continue to rate the stock a Strong Buy, with a year-end price target of $12 per share.
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(Corrected) Sky Petroleum Buy Rating Reiterated in Update Report
Richard R. Wolfe, CFA
April 27, 2006. We have increased our production forecast for Sky Petroleum (OTCBB: SKPI) during 2006 and subsequent years, based on the Company's drilling progress reports. Our updated forecast for 2006 of 722,000 barrels is 10% higher than our previous figure, and our 2007 forecast of 2.0 million barrels is up by 14%. In 2006 and 2007, we now forecast discretionary cash flow of $23.9 million and $61.8 million, respectively, figures that are 15% higher than our prior expectations. In 2006, Sky should begin to report substantial earnings growth. Net income is expected to go from a 2005 loss of $6.0 million to 2006 estimated earnings of $21.8 million/$0.34 per share and $56.2 million/$0.86 per share in 2007. We reiterate our Buy rating and our $3.90 12-month price target.
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Baldwin Reports Sales and Net Income Slightly Above Expectations; Reiterate Buy Rating
Wayne M. Lottinville, CFA
April 27, 2006. Baldwin Technology Company, Inc. (AMEX: BLD) today reported third-quarter sales of $45.4 million and net income of $1.7 million, or $0.11 per diluted share, compared with sales of $43.7 million and net income of $1.5 million, or $0.10 per share, a year ago. Sales increased 4.1% on year-ago results, while net income rose 16% in the same period. Reported sales and net income slightly exceeded of our expectations, yet both were negatively impacted by currency translations. Before currency adjustment, sales increased 13% over year-ago results to $49.2 million, and net income increased by 34% to $2.0 million. Backlog rose 3.8% to $53.6 million compared to December 31, 2005, and orders increased 9% to $47.4 million. Baldwin's impressive come-back story remains intact, yet unfavorable currency translation continues to mask the underlying strength of that rebound. We reiterate our Buy rating on the stock.
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(Corrected) BioSphere Medical Reports First Quarter Results; Reiterate Strong Speculative Buy Rating and $11.00 Price Target
Stephen L. Handley
April 27, 2006.  In our view, results for the first quarter, reported Thursday April 27th, were respectable but not exciting. Sales were closely in line with two recently published Street estimates, while the loss was somewhat greater; the latter was presumably the reason the stock came under pressure after the earnings release. Moreover, it is clear that management's decision to accelerate the increase in sales and marketing expenses will deepen and extend losses beyond our earlier assumptions. It is also our view that management is taking the right steps to fully capitalize on the strength of its product line and the major potentials for embolization in the treatment of uterine fibroids and liver cancer. The recently expanded salesforce should have a more positive impact beginning this quarter, and important new products are likely to be introduced in the U. S., Europe and Asia during the next few months. We expect the stock to respond favorably to these developments. In short, we are convinced that BSMD represents a compelling investment opportunity for aggressive investors. We are therefore retaining our price target of $11 per share and our Strong Speculative Buy rating.
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DXP Enterprises Reports Blow-Out First Quarter; EPS Estimates and Price Target Raised; Upgraded from Buy to Strong Buy
Paul J. Resnik, CFA
April 27, 2006. April 27, 2006. DXP Enterprises, Inc. (NASDAQ:DXPE) yesterday announced first quarter net income of $2.5 million, with diluted earnings per share of $.44 compared to net income of $0.9 million and diluted earnings per share of $.15 for the first quarter of 2005. Sales increased 49.6% to $62.5 million from $41.8 million for the year earlier period. Revenues for previously existing and acquired businesses and profit margins all exceeded our expectations. Our new estimates for full year 2006 are revenues of $265.2 million versus $185.4 million in 2005 and our previous estimate of $244.9 million and EPS of $1.82 versus $0.94 in 2005 and our previous estimate of $1.45. Our tentative estimates for 2007 have been raised from revenues of $293.8 million to $318.2 million and from EPS of $1.85 to $2.45. Our 12-month price target, based on a 20 price/earnings multiple, is now $49 and we are raising our rating from Buy to Strong Buy.
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O2Diesel Announces Las Vegas Test; Speculative Buy Reiterated.
Sally H. Wallick, CFA
April 27, 2006. O2Diesel (AMEX: OTD) signed a memorandum of understanding with the automotive division of Clark County, Las Vegas, Nevada to test the Company's ethanol/diesel fuel blend, O2Diesel (TM), in 13 vehicles for 120 days. Assuming positive results from the test, all 300 of the county's vehicles will be switched to O2Diesel. This agreement is the latest indication of O2Diesel's progress toward commercializing its proprietary, clean-burning diesel blend. We reiterate our Speculative Buy rating.
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O2Diesel Speculative Buy Rating and Price Target of $2.25 Reiterated in Update
Sally H. Wallick, CFA
April 25, 2006. O2Diesel Corporation has developed a proprietary additive technology, O2D05, which facilitates the blending of ethanol, an oxygenate, in diesel fuel, resulting in a proprietary, clean-burning fuel called O2Diesel. Extensive testing has shown that the use of O2Diesel alone or with other emission-control devices can produce significant and verifiable reductions in diesel engine emissions. Management's business strategy is aimed at commercializing the Company's products in the U.S. and internationally. Our rating on O2Diesel's shares is Speculative Buy with a target price of $2.25 per share (within a range of $2.00-$2.50 per share), based on estimated revenue potential in 2011 of approximately $250 million, assuming market share of 5%. In our opinion, O2Diesel is in the right place at the right time to take advantage of a more favorable environment for renewable fuels.
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TMSF Holdings Rating Raised from Neutral to Speculative Buy
Richard W. West, CFA
April 25, 2006. TMSF Holdings (OTCBB: TMFZ) held a conference call on April 21, 2006.
As detailed in the SEC form 10K, management reiterated that in 2005 they incurred $0.7 million in legal and accounting fees associated with the preparation and filing of their information statement/prospectus on Form S-4 with the SEC. General and administrative expenses increased 55.6% to $5.9 million for the year 2005, from $3.8 million for 2004. Going forward into 2006, we are assuming that the increase in G&A expenses will be ameliorated with the lower legal and accounting fees and by slower or even no increases in employee headcount. From the discussion in the conference call, it is apparent that the change in status for TMSF Holdings to an REIT is being delayed but still considered dependent upon the status of interest rates. We believe the sell-off in TMSF Holdings from the $2.90 price per share has been overdone and the stock is now stabilizing at $1.50-$1.70 per share. At this level, we believe the downside is limited. We are increasing our Rating for TMSF Holdings from a Neutral to Speculative Buy and setting a price target of $2.00 per share. We will publish an Updated Research Report with a modified income model after the Company's release of its first-quarter earnings.
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National Coal: Price Target Raised; Update Report Forthcoming; NCOC Now Trading On NasdaqNM
Richard R. Wolfe, CFA
April 24, 2006. We are increasing our 12-month price target for National Coal Corp. (Nasdaq: NCOC) which recently transitioned to trading on the NasdaqNM. We are maintaining our Buy rating with new price target of $12.15.
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Pacific Ethanol Announced Board Changes and Resignation of COO Viewed Constructively; Rating Remains Neutral
Paul J. Resnik, CFA
April 24, 2006.  Pacific Ethanol, Inc. (Nasdaq: PEIX) announced today that concurrent with the closing of its offering of preferred stock to Cascade Investment, L.L.C. on April 13, 2006, Charles Bader and Kenneth Friedman resigned from the Board of Directors and Douglas L. Kieta and Robert P. Thomas were appointed to fill the resulting vacancies. The Company also announced the resignation of Ryan Turner as Chief Operating Officer and Secretary effective as of April 19, 2006. We view today's announced board and management changes as understandable and constructive. The shares have risen sharply in response to prospects for high ethanol prices this summer. As Pacific Ethanol does not currently have production capability, and as we believe that it is at best uncertain that this summer's ethanol prices will be sustained, we are maintaining a Neutral rating on the stock despite our favorable long-term outlook for ethanol in general and Pacific Ethanol in particular.
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Quest Oil News Prompts Rating Downgrade to AVOID
Richard R. Wolfe, CFA
April 24, 2006. On April 21, 2006, in an SEC current report on Form 8-K that described several new developments, Quest Oil Corp. (OTCBB: QOIL) disclosed that its most productive well, the Acadia North 10-22 producing natural gas from the shallow Viking Sand in the Arneson area of southeastern Alberta, has been shut-in. The 10-22 well had been the source of better than half the Company's operating cash flow. The situation at Acadia North is further complicated by the concurrent disclosure that previously interpreted three-dimensional seismic data shot in the field late last year is now to be reviewed and analyzed by a third party to be designated in the near future. This development together with the departure of nearly all of its management with industry specific expertise, forces us to consider that the future of the Company may be in serious doubt. We are therefore lowering our rating to Avoid.
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O2Diesal Announces Financings; Rating Raised to Speculative Buy.
Sally H. Wallick, CFA
April 21, 2006. O2Diesel Corporation (AMEX: OTD) announced two financings totaling $6.5 million. We view these financings as important and positive developments for O2Diesel. We are also encouraged by the operational progress being made by the Company. Also, the O2Diesal's share price has retreated more than 40% from a recent high of nearly $3 per share, despite positive news from the Company, including the announcement of an important contract with the Department of Defense to develop a new alternative diesel fuel and yesterday's financing announcement. Therefore, we are raising our rating on the shares from Neutral to Speculative Buy with a target price of $2.25 per share (within a range of $2.00-$2.50 per share).
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Biophan Technologies Mentioned in Harvard Heart Letter Article; Speculative Buy Reiterated
Richard W. West, CFA
April 20, 2006. In an article in the Harvard Heart Letter, Harvard Medical School points out the incompatibility issues between magnetic resonance imaging (MRI) and pace makers and/or implantable cardioverter/defibrillators (ICD). Biophan Technologies, Inc. (OTCBB: BIPH), which is working in the area of making pacemakers and ICDs safer and compatible by filtering out MRI radio waves and redesigning the implant leads to prevent stray voltages and heating at the tip of the leads, was mentioned (it was the only company mentioned) as, "one company that has been public about its work in this area", of MRI safety and compatibility. We reiterate our Speculative Buy rating and 12-month price target of $3.00 per share.
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Chemokine Therapeutics Changing Relationship with Pharmaceutical Product Development, Inc. Concerning CTCE-0214; Rating Revised from Speculative Buy to Neutral
William R. Prather, RPh, MD
April 20, 2006. On April 17, 2006 Chemokine Therapeutics (OTCBB: CHKT) announced they were reacquiring the licensing rights for CTCE-0214 from Pharmaceutical Product Development, Inc. (PPD). CTCE-0214 is one of Chemokine's lead products being investigated for use in mobilizing white blood cells and stem cells for patients with low white blood cell counts and those requiring stem cell transplantation. We view this announcement as potentially a negative for Chemokine. At this point we view Chemokine as essentially using PPD's funding to get jump-started as a Company and is now repaying the "loan". However, we believe Chemokine is now taking on the risk that CTCE-0214 is safe and efficacious and then finding another collaborator. We harbor sufficient concerns surrounding the potential ramifications of this announcement to revise our investment recommendation on the common stock of Chemokine to neutral from Speculative Buy.
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DXP Enterprises Announces Fabrication Center Expansion; Reiterate Buy Rating
Paul J. Resnik, CFA
April 20, 2006. DXP Enterprises, Inc. (NASDAQ: DXPE) announced on April 18, 2005 that they have contracted to expand their Houston fabrication center by 37,125 square feet to 78,375 square feet. Construction is scheduled to begin on May 1st. The addition will significantly increase DXP's capacity to provide pumps and pump packages to their customers. The new free-standing facility will be leased starting with date the building is ready for occupancy (expected to be August). This development underscores our belief that the Company is looking at a period of strong sustained demand, particularly in its pump business. We reiterate our Buy rating on the stock.
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INX Inc. Will Start Trading as INXI on NASDAQ Beginning April 24; Reiterate Strong Buy Rating
David P. Soetebier, CFA
April 20, 2006. April 20, 2006. INX Inc. (AMEX: ISR) will begin trading on the Nasdaq Capital Market on Monday, April 24, 2006, under the ticker symbol INXI for its common stock and INXIW for its warrants. Trading of INX common stock and warrants on the American Stock Exchange are expected to cease as of the close of business on or about Friday, April 21, 2006. We believe Nasdaq will provide INX with better visibility and liquidity for the company's shares. The shares are rated Strong Buy rating with a target of $10.00.
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Smart & Final to Report 1Q 2006 Results After Close of Trading Today; Estimate EPS of $0.14 vs. $0.11; Stock Rated Buy
Jonathan H. Ziegler, CFA
April 20, 2006.  Smart & Final (NYSE: SMF) reports its first quarter 2006 results this afternoon after the market close and will be hosting a conference call on Friday morning at 9:00 AM PDT. Our estimates for the 12-week quarter ended March 26 2006 as compared to the actual results for the first quarter last year are sales of $449.3 million vs. $427.6 million and earnings per share of $0.14 vs. $0.11. Although the Company, in conjunction with its majority shareholder Groupe Casino, has announced it is exploring strategic alternatives, we continue to believe that the operating results are important and that Smart & Final is yet early in its ramp of its more-aggressive capital program with our expectation of improved results to come. We rate the stock a Buy.
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TMSF Holdings Announces 4Q and FY2005 Results; Stock Down Sharply on Breakeven 4Q;
Rating Reduced to Neutral
Richard W. West, CFA
April 20, 2006.  After filing its SEC Form 10-K for FY2005 on April 17, 2005, TMSF Holdings, Inc. (OTCBB: TMFZ) announced on April 19, 2006, in a press release, results for the fourth quarter of FY2005 and FY2005. Higher interest rates and the flattening of the yield curve took their toll on the income and net earnings of TMSF Holdings. The breakeven results for the fourth quarter shocked investors as the stock sold down 41.3% from an intra-day high of $2.90 on April 17, 2006, to the present price per share of $1.70. While we believe the sell-off is overdone, we are reducing our rating to Neutral at this time, and will review our rating after the management's conference call on Friday, April 21, 2006.
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Baldwin Technology: Buy Rating In Initiating Coverage; Reclaiming Market Position As The Worldwide Leading Supplier Of Accessories And Controls For The Commercial And Newspaper Printing Press Industries.
Wayne M. Lottinville, CFA
April 19, 2006. Baldwin Technology (AMEX: BLD) is reclaiming its market position as the worldwide leading supplier of accessories and controls for the commercial and newspaper printing press industries. Early results in this reincarnation are impressive, with sales rising over the past two fiscal years at a compound annual rate of 13.6% to $173 million in FY05. Operating and net income have moved solidly into the black. Over the same period, operating cash flows surged at an annualized rate of 127% to $14 million. Management has leveraged the Company's burgeoning cash position to renegotiate and pay down debt, increasing the Company's financial capacity and strength. In addition, expectations of continued global economic expansion favor the projected increases in Baldwin's sales, as the Company improves its presence in fast-forward emerging markets and takes advantage of printers' capital expenditures. The trend for printers in developed markets is to update and retool their presses to improve productivity, reduce raw materials waste, and better address the industry trends cited above. Sales are projected to reach $180 million in FY06 and $190 million in FY07. Add in the potential for continued margin expansion, and net earnings could reach $0.39 per diluted share in FY06 and $0.51 per share the following year.
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Global Alumina Corporation Strong Speculative Buy Rating In Initiating Coverage; An Absolute Rarity In The Alumina/Aluminum Industry
Les W. Childress
April 19, 2006. Global Alumina (TSE: GLA) is an absolute rarity in the alumina/aluminum industry. It is a relatively recent, publicly traded, single project, non-integrated company, building what will be at 3.0 million tonnes per year the world's largest greenfield alumina refinery and one of the lowest cost alumina refineries in the world. Production is anticipated to expand to 4.5 million tonnes per year (mty) in the 2013 to 2014 time frame eventually reaching 5.2 mty. Global Alumina holds a long-term (minimum 75-year) mining concession covering 690 square kilometers containing over one billion tonnes of some of the highest quality and most prolific bauxite ore reserves in the world. Global's reserves are located in the middle of the bauxite-mining fairway in the Boke mining district in the West African nation of the Republic of Guinea and consist of proven and probable bauxite reserves of 188 million tonnes equivalent to a 25-year supply at estimated production. However, the reserves are at least four times this figure because the 25-year plan is developed on only 3 of 19 resource plateaus. Guinea is believed to hold 30%-70% of the world's known reserves of bauxite. On a project and mine site tour in late November 2005, we observed first hand that the government of Guinea and general population solidly support Global Alumina's project. At 1.60 Global Alumina shares currently trade at 26.2% of our net asset valuation of $6.10 per share derived principally from our DCF projections supplemented by a kind of option value for the shares. This figure could vary up or down depending on the nature, timing and size of a contemplated equity offering designed to supplement a planned debt financing to complete the project.
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Vita Food Products Speculative Buy Rating in Update Coverage
Gerald F. LaKarnafeaux, CFA
April 19, 2006. Vita Food Products (AMEX: VSF) has been undergoing a transition in management since June of 2005, when CFO Cliff Bolen was promoted to Chief Operating Officer. The recent changes call for the establishment of an Office of Chief Executive. Revenues in 2005 continued the under-performance reported over the past two years. Revenues in 2005 were down by 3.9% to $46.9 million, while revenues in the fourth quarter were higher by approximately 2%. The Company has reported strong qualitative and quantitative fundamentals over the past six months. The stock has responded by appreciating from $2.40 per share to the current price of $3.35 per share, which is 6% above our last target price of $3.15 per share. We believe the fundamentals justify an increase in the 12-month target price to $3.60 per share. In 12 months, we believe the Company should report earnings per share of $0.21, with the prospects of higher earnings in 2007. The price earnings ratio on the new target price is 17 times, which is reasonable for a food processing stock considering the anticipated strong relative earnings performance. We admonish the reader that the sharp appreciation in recent weeks could result in short term volatility until the first quarter is reported in the next six weeks. However, in spite of the potential profit-taking following the run up in the stock, we are maintaining our Speculative Buy rating.
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Chembio Diagnostics Receives Approvable Letter from FDA; Price Target Raised 50% to $1.50; upgrade to Strong Speculative Buy Rating:
Stephen L. Handley
April 19, 2006. April 19, 2006. Chembio Diagnostics Inc. (OTCBB: CEMI) today announced that the Company has received an "approvable" letter from the FDA for its SURE Check® HIV _ and HIV _ STAT-PAK™ rapid test Pre-Market Applications (PMAs). Marketing approval is subject only to final review by the FDA of the package inserts for each of the products and other standard conditions related to all PMAs, so that the final clearance is expected to be received in the near future. Management is currently in discussions with a potential U.S. marketing partner, apparently aimed at granting that company exclusive rights to market these rapid HIV tests in the U. S. We look forward to the announcement that Chembio has obtained a qualified marketing partner and to tracking the success of its entry into the attractive U.S. market. As discussed previously, the Company has also taken important steps to obtain a meaningful share of the HIV test market certain foreign countries. In short, the Company has strong positive momentum. Accordingly, we are raising our 12-month price target for the stock from $1.00 to $1.50 and our investment rating from Speculative Buy to Strong Speculative Buy.
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Minrad Announces Impressive First Quarter Results; Maintaining Strong Buy Rating with Target Price of $5.85
William R. Prather, RPh, MD
April 19, 2006. On April 17, 2006 Minrad International, Inc. (AMEX; BUF) announced its financial results for the first quarter. Revenues, at $3.1 million, were approximately 10% short of our estimate of $3.5 million but grew almost 30% from Q1-05 revenues of $2.4 million. We were also pleased that gross margins of approximately 50% exceeded our estimate of 45%. Excluding a preferred stock dividend charge of $180,000, the Company exceeded our EPS estimate of ($0.03) by $0.01 but matched our estimate when this charge was included. We interpret the results of this quarter for Minrad as positive and the beginning of an escalating growth in sales for the Company's anesthesia and image guided product lines. We believe Minrad is capable of generating revenues and earnings of approximately $21 million and $0.02 respectively for 2006. However, we expect huge growth in 2007 as the Company's sales and marketing efforts bear fruit, and believe Minrad can post revenues and earnings of $72 million and $0.49 respectively in this year.
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Guideline: Rating Maintained At Strong Buy; A Business Calls Guideline When It Needs Information Collected And Aggregated To Make Key Decisions
David Riedel
April 18, 2006. Guideline (OTCBB: GDLN) is an outsourced information service company. Guideline is the company that a business calls when it needs information collected and aggregated to help it make a decision about a new business, product, acquisition, opportunity or threat. It is, we believe, the only single-source provider of business information and research in the market. Through its recent acquisitions, the Company has a complete line of business research solutions and can serve whatever research needs a client might have. This powerful platform is starting to show results in terms of cross-selling. Product Development Intelligence, for example, has had some success incorporating the larger market study capabilities of the Custom Market Research group into projects it is doing for its clients. In addition, Strategic Intelligence has developed in recent quarters a number of projects that have evolved into projects requiring the consumer survey work of Custom Market Research. The company has been developing and rolling out new businesses which have combined primary and secondary research, highlighting the strength of these two capabilities under one umbrella.
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XAAR: Buy Rating Reiterated; Only Pure-Play, Independent And Publicly Traded Digital Inkjet Printhead Developer And Manufacturer
Rafael K. Kapelinski
April 18, 2006. Xaar (LSE: XAR) is the only pure-play, independent and publicly traded digital inkjet printhead developer and manufacturer. The Company is one of the leading companies in this space, with a strong customer base, unique products and technologies and an outstanding customer support organization. Significant R&D activities are underway with numerous partners across fields as diverse as electronics, displays, labeling and coating. Xaar was one of the early pioneers of the digital inkjet industry and the Company's positioning in the digital inkjet value chain remains unique. It has consistently spearheaded important technological breakthroughs. In fact, it is one of the very few printhead manufacturers that offer both binary and grayscale products. We reiterate our Buy rating for Xaar Corporation and price target of US $6.15 (unchanged at £3.50), which implies 17% upside from the current levels. The Company's share price has fallen following the publication of the better-than-expected full-year 2005 results on March 14, which in our view has created an attractive buying opportunity.
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EasyLink Services Announces Equity Financing; Rating Raised to Speculative Buy
Paul J. Resnik, CFA
April 18, 2006. EasyLink Services (NASDAQ: EASY) announced after the close of trading yesterday that it had completed its previously announced $5.4 million common stock financing, adding approximately 9.0 million shares to the 45.2 million shares outstanding. The successful completion of the common stock financing removes a significant concern for EasyLink shares and the stock has rallied this morning. Although the shares may have difficulty sustaining this strength over the near term pending greater visibility for growth, particularly in Transaction Management Services (TMS) revenues, we believe that if sales momentum for TMS begins to pick up in the second quarter in line with management guidance, the stock can move to higher levels. We are maintaining our estimate for full year 2006 revenues and earnings per share of $78.6 million and ($0.01), introducing preliminary estimates for 2007 of $88.5 million and $0.07, assigning a 12-month price target of $0.91 for the stock (assumes a slightly below market price/earnings multiple of 13), and raising our rating from Neutral to Speculative Buy.
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Joystar: Announces Record Bookings For First Quarter
Richard W. West, CFA
April 18, 2006. Joystar announced that its gross travel bookings in the first-quarter FY2006 reached record level of approximately $17.0 million. Considering that Joystar's gross travel bookings in all of FY2005 were $16.5 million, this current level bodes well for revenue and earnings in FY2006.
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Telkonet Inc. Deploys Wifi Networks In New York City
Richard W. West, CFA
April 18, 2006. Microwave Satellite Technologies, Inc (MST), a subsidiary of Telkonet, purchased five WiFiber™ wireless fiber links from GigaBeam (Nasdaq:GGBM-$13.50) that will be deployed in New York City. This announcement of MST's acquisition of GigaBeam's WiFiber™ wireless fiber links illustrates the synergy between MST and Telkonet's proprietary high-speed power line communications (PLC) networking solution. We reiterate our Speculative Buy Rating and reaffirm the 12-month price target of $6.25 per share.
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Pacific Ethanol: Files 2005 10K; Closes Preferred Stock Sale and Debt Financing
Paul J. Resnik, CFA
April 17, 2006. Pacific Ethanol (Nasdaq: PEIX) has filed its 10K for 2005 and announced the closing of previously announced preferred stock and debt financings. We continue to believe that Pacific Ethanol is well-positioned in California, a state that is the largest consumer of ethanol but has almost no instate production, and that, even if ethanol prices pull back from current historically high prices, the Company's proposed plants will be highly profitable. We will review all our current revenue and earnings per share estimate for Pacific Ethanol following discussions with management. While the stock at $33.00, up over 10% today, continues to attract investors seeking an attractive vehicle for long-term participation in the growing ethanol market, we believe our current rating of Neutral properly assesses the likely volatility for these shares.
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O2 Diesel: Highlights of 2005 10-K.
Sally H. Wallick, CFA
April 15, 2006. On April 13, O2Diesel (AMEX: OTD) filed its 10-K for the year ended December 31, 2005. While there were no surprises in the document, we make several comments worth reviewing.
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Biophan Technologies: Initial Rating At Speculative Buy; Several Proven Technologies That Are On The Cusp Of Commercialization By Licensees.
Richard W. West, CFA
April 13, 2006. Biophan Technologies (OTCBB: BIPH) is a maturing developmental stage company. We say maturing, because Biophan has several proven technologies that are on the cusp of commercialization by licensees. The Company announced on March 30, 2006, a declaration of intent to enter into negotiations for strategic research collaboration designed to provide new solutions in the growing field of interventional MRI medicine and MRI-assisted minimally invasive surgeries between Siemens' Medical Solutions MRI Division (NYSE:SI) in Europe and Biophan Europe GmbH.while its proprietary technologies for safely enabling implantable biomedical devices has been licensed by Boston Scientific Scimed, Inc. Based on the multiple technologies and the diverse markets addressed by Biophan, the quality of its management team, the license agreement with Boston Scientific, the possibility of license agreements with Siemens, the possibility of further licensees from other health care manufacturers of MRI equipment, the acceptance of Biophan's VAD device, the acceptance of Biophan's drug eluting stent, the completion and funding of the three financing deals, and other possible technologies advances by Biophan, we are assigning a rating of Speculative Buy and 12-month price target of $3.00 per share. Investors should be cognizant of the risks specifically applying to Biophan and the risks of the general market acceptance to health-care technology stocks.
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Paulson Capital: Strong Buy Rating Maintained In Updated Coverage; Corporate Finance Activities Increasing
Richard W. West, CFA
April 13, 2006. Paulson Capital Corp. (Nasdaq: PLCC) has an outstanding record of successfully raising capital for companies in the small-cap marketplace (less than $45.0 million), having underwritten $1.1 billion of such offerings between June 1, 1978, and December 31, 2004. Since January 1, 1995, Paulson Capital has underwritten approximately $550.0 million of offerings. As we pointed out in our Initial Research Report, ".....investors must be willing to accept the market risk that ties Paulson Capital's results to the stock market and the corporate finance climate." The results for the FY2005, while most positive, reflect the fact that PIC was not that active in the corporate finance market during that period. Mr. Chester Paulson, founder and Chairman of the Board, indicated on the conference call that they plan to complete one corporate finance deal per quarter over the next 12 to 18 months. This increase in deal activity should positively affect the results for Paulson in 2006. Compared with the selected peer brokers, its P/E ratio is lower than its peer, as is its Price/book ratio (with the exception of First Albany and Greenhill & Co Inc.) Its profit margin of 21.9%, operating margin of 41.6% is higher than the peers, as is its return on assets of 17.1% and return on equity of 23.2%.
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CORRECTED: Visiphor: Upgrading to Strong Buy Rating On the Share Price Pullback; Company Is Clearly Undergoing An Important Transition
Rafael K. Kapelinski
April 13, 2006. We upgrade Visiphor (OTCBB: VISRF) to a Strong Buy rating following the recent pullback in the share price. Our price target of US$ 0.50 per share implies 100% upside potential. The Company's shares are trading at P/Sales 2006E of 0.6x. We would like to argue that the recent acquisition of Sunaptic has improved Visiphor's risk profile and the current valuation appears attractive. In the past, we believe that Visiphor's relatively high customer concentration and an exclusive focus on the long-cycle law enforcement market drove an aggressive discount to the Company's valuation. Following the recent acquisition of Sunaptic, the Company has a stronger consulting arm, a more diversified customer base and a broader product portfolio. The integration is complete with both companies actively exploring cross-selling opportunities.
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American Software: Buy Rating In Update Coverage; Leading Supplier of Supply Chain And Enterprise Management Software
David P. Soetebier, CFA
April 12, 2006. American Software (Nasdaq: AMSWA) is a leading supplier of supply chain and enterprise management software. Financial progress made in recent quarters has been partially hidden by accounting adjustments made for the Demand Management Inc. (DMI) acquisition, other nonrecurring charges at Logility (NasdaqNM: LGTY $9.23), and a higher tax rate at American Software. We expect strong revenue growth for fiscal year 2006 (ending April 2006) and higher operating income. However, the increase in operating income will be partially offset by higher reported taxes, as results are now reported on a fully taxed basis versus being offset by net operating losses (NOLs) in the past. Consequently, the strong operating income improvement we are projecting for Logility in fiscal 2007 will not fully translate into after-tax earnings for the parent company. Fiscal 2008 will be our first "normal" year, during which earnings won't be negatively impacted by higher taxes as they were in the year earlier and other non-ongoing items. Because of the confusion in the reported results, we don't believe the stock price has fairly reflected the growth potential of the Company. The shares are rated Buy with a target of $8.00. In addition to providing investors with longer-term growth potential, the shares of American Software have a current cash dividend of $0.07 per quarter.
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LJ International: Strong Speculative Buy Rating; Growth As Manufacturer and Supplier Worldwide of Fine Jewelry With Growing Chain of Retail Stores in China
Sally H. Wallick, CFA
April 12, 2006. Hong Kong-based LJ International Inc. (Nasdaq; JADE) designs, manufactures, distributes and markets a full range of fine jewelry. The Company's customers include leading department and discount stores, fine jewelers, national jewelry chains, electronic and specialty retailers, and home-shopping television networks throughout North America, Western Europe, Japan, Hong Kong and China. In addition, its ENZO division retails jewelry in China. We believe that LJI's vertically integrated structure, extensive product line, and diversified customer base provide significant competitive advantages, while its expansion into the retail jewelry business in China results in substantial new growth opportunities. LJI's fourth-quarter revenue increased 26% year over year to a record $31.6 million while diluted EPS were $.09, up 50% year over year and ahead of management's most-recent guidance. Full-year 2005 revenue totaled $94.6 million, and diluted earnings came in at $0.24 per share, up slightly from $0.23 per share in the prior year. We believe that China, with annual retail sales of more than $600 billion (including an estimated $15 billion in jewelry sales), represents a large and very exciting growth opportunity for LJI. The Company is penetrating this market mainly by means of ENZO retail stores. The ENZO division has, to date, performed better than expected, and it appears to be on track for reduced losses (and breakeven EBITDA) in 2006 and profitability in 2007. We reiterate our Strong Speculative Buy rating on LJI Common Stock and a $4.80 price target.
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DXP Enterprises: Upgraded to Buy on Stock Pullback
Paul J. Resnik, CFA
April 12, 2006. DXP Enterprises' (Nasdaq: DXPE) shares have pulled back over 15% from the high reached on April 10. While this can be explained simply as a pullback following a sharp rise, price weakness and concerns/rumors sometimes create a not so virtuous circle. Accordingly, we would like to make the following observations contined in our note. On the basis discussed in our note, we are raising our 12-month price target from $33.30 to $37.00 and our rating on the stock from Neutral to Buy.
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AlphaRx: Raising Price Target 40%,
Stephen L. Handley
April 11, 2006. AlphaRx (OTCBB: ALRX) has announced an important licensing agreement for its lead product, Indaflex™, which provides needed immediate financing, promises to absorb futures development and marketing costs for this compound, and offers AlphaRx potentially major future milestone payments. This has prompted us to raise our year-end price target from $0.25 to $0.35 per share. It remains somewhat difficult to establish a meaningful valuation target for AlphaRx, but clearly this announcement has very favorable implications. Moreover, we judge that there is little risk that Indaflex will not prove efficacious. As noted, we have increased our year-end price target and are also maintaining our Speculative Buy rating.
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American Software: Due To Price Appreciation, Lowering Rating To Buy
David P. Soetebier, CFA
April 11, 2006. The shares of American Software (Nasdaq: AMSWA) have moved up in price to a point that our target of $8.00 no longer provides a return of greater than 15% from the current selling price. Rating now Buy.
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Electric City Corp.: Reports Sale Of Great Lakes Division; Reducing Rating To Speculative Buy And Price Target To $1.00 Per Share
Richard W. West, CFA
April 11, 2006. Electric City (AMEXX: ELC) filed a SEC Form 8-K on April 3, 2006, covering the sale of its Great Lakes Controlled Energy Corporation division (Great Lakes) for 212,904 shares of Electric City common stock (shares being retired). This sale is the first step in strategy being employed by Electric City's new management. We are reducing our Rating to Speculative Buy and reducing our price target to $1.00 per share. We are in the process of publishing an Updated Research Report and will continue to monitor progress of the new management strategy.
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Pacific Ethanol: Shares Up Sharply as Ethanol Prices Rise
Paul J. Resnik, CFA
April 11, 2006. Pacific Ethanol (Nasdaq: PEIX) shares have risen over 40% in the last four trading days (and look like they will open strong again today) against a backdrop of rising gasoline prices and ethanol prices. We believe that Pacific Ethanol has an extremely promising future, and we recognize that current excitement about ethanol prices may drive ethanol-related shares higher. However, we are hesitant to extrapolate current pricing indefinitely into the future. Accordingly, while we believe Pacific Ethanol shares have appeal for investors seeking to participate in the long-term growth of ethanol usage, we believe a Neutral rating is appropriate for these increasingly volatile shares.
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Elron: Given Imaging Positive U.S. Patent Examination Should Calm Fears Surrounding Competitive Threats
Barry Raeburn
April 10, 2006. On Friday, April 7 Given Imaging, a public subsidiary of Elron Electronic Industries (Nasdaq: ELRN) announced that the United States Patent and Trademark Office (USPTO) issued a decision confirming the validity of 13 of the original 17 claims of Given Imaging's first US patent number 5,604,531. Given can appeal the 4 rejected claims, but Olympus, a new competitor of Given, cannot appeal the 13 reaffirmed claims. We discuss the ramifications of this decision. We maintain our Strong Buy rating and 12-month price target of $15.
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O2Diesel: Department of Defense Contract Could Result In A Substantial Revenue Opportunity. Given A More Than Quadrupling of The Share Price in Less Than Two Weeks, Lowering Our Rating to Neutral from Speculative Buy Based on Valuation.
Sally H. Wallick, CFA
April 10, 2006. O2Diesel Corporation (AMEX: OTD) announced that it is under contract with the Department of Defense (DoD) to develop a new cleaner burning alternative diesel fuel. The fuel will be composed of at least 20% renewable sources, including O2Diesel's proprietary additive, O2DO5. The fuel, if successfully finalized, will help DoD facilities to comply with Executive Order 13149. We are lowering our rating on the shares from Speculative Buy to Neutral based solely on valuation, haing more than quadrupled from $0.65 per share on March 27 to $2.82 per share on April 7. We raised our target price for the shares from $1.00 to $2.00. For the time being, we are omitting a target price.
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correction: Seabridge Gold: Focused On Gold Ownership And Gold Flow; Announces Acquisition of the Noche Buena Gold Project
Les W. Childress
April 10, 2006. Within the JMD universe of oil and gas and mining companies, Seabridge Gold (AMEX: SA) is unique. Structurally and philosophically the company is focused on gold ownership and gold flow, which we believe is the best way to play the rising commodity price of gold. It is even better in our view than gold ETF. Seabridge announced Monday its acquisition of the Noche Buena gold project from Hecla Mining. As a result of the acquisition and our forecast for gold prices above $600/oz this year touching $700 at some point during the year, our $16.40 NAV is elevated to a preliminary $22.00 while our short-term price target is under review. We reiterate our Strong Buy recommendation.
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Top Image Systems: Company Update, Reiterate Buy and Price Target of $5
Rafael K. Kapelinski
April 10, 2006. We reiterate our Buy Rating on Top Image Systems (Nasdaq: TISA) prior to the Company's announcing 1Q 2006 results on May 10. Historically, 1Q has been seasonally the weakest for the Company. However, given the slew of recent contract wins and the strong contribution from Japan, we believe that the Company is on track to reach our target. In our view, any evidence of the Company's ability to shift the sales mix towards software and improve the margins more than already embedded in the valuation (target EBITDA 2006E margin of 14%) has the potential of impacting the share price in a positive way.
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Clearant: Studies Show That CLEARANT PROCESS Does Not Negatively Affect The Functional Characteristics Of Tissue. Speculative Buy Rating Reiterated.
Sally H. Wallick, CFA
April 09, 2006. Recent studies provide additional evidence that using Clearant's (OTCBB: CLRI) CLEARANT PROCESS(TM) to sterilize human tissue does not affect its functional characteristics, a very important consideration for surgeons and their patients. We review briefly these studies and their importance to growing acceptance of the CLEARANT PROCESS (TM) by surgeons.
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Apex Silver: Comment On 2005 Year- End Results & Public Offering
Les W. Childress
April 07, 2006. Apex Silver Mines reported a fourth quarter and full year 2005 loss which was a result of a mark-to-market non-cash charge on a hedge position that had been previously recorded. Separately, Apex announced the sale of 6.4 million shares in a secondary public offering at $24.45 per share. It is important to note that, contrary to normal patterns when additional shares are offered, the stock price went up and stayed there ending the day at $26.00, up $0.79 or 3.13%. A big reason is the significant institutional demand for silver stocks generally and very few big cap ways to play it.
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FX Energy: Maintain Current Rating Pending Discussion at Oil & Gas Symposium Next Week
Les W. Childress
April 07, 2006. FX Energy reported fourth quarter and full year results for 2005 on which we comment. FX Energy's balance sheet remained quite liquid. The share price weakened considerably on the news of the Sroda-5 test and sits near the 52-week low. However, the Company remains debt free and land rich in Poland and has developed a new well program in Poland. We will comment on these topics in our forthcoming update report late next week after FXEN's presentation at the IPAA Oil & Gas Symposium in New York.
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Gastar: Comment on 2005 Results: Buy Rating Maintained
Les W. Childress
April 07, 2006. Gastar reported fourth quarter and year-end 2005 results late last week. Results were in line with expectations and were generally far above last year's low base and final formative year in 2004. We review the highlights. As for individual well performance, the Donnelson #1 discovery well has been on production about a month producing at a rate of 7.5 Mmcfd. Overall the Donnelson #1 appears to support Gastar's geologic model in the area.On this latter point it is interesting to note that Chesapeake has added significantly to its acreage in East Texas to 120,000 net acres. Encana too has added. We are attending the IPAA Oil & Gas Symposium next week where Gastar will be presenting on Tuesday. After the Symposium and until we finalize our report, our price target for the shares remains under review.
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IntegraMed - Significant Expansion of Seattle Practice Sets the Stage for Margin Expansion - Strong Buy
David Riedel
April 07, 2006. IntegraMed (Nasdzq: INMD), the largest fertility services company in the U.S., has announced a major expansion of their service in Seattle. This is similar to a contract signed in Boston a few months ago which had the ability to dramatically increase the number of procedures being handled by the IntegraMed practice. These agreements seem to provide evidence that IntegraMed's service and value is recognized by the foremost professionals in the fertility field. Reiterate our Strong Buy rating and $15 price target.
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Quest Oil: Update on Internal Legal Dispute; Dutton Rating Maintained at Neutral
Richard R. Wolfe, CFA
April 07, 2006. On April 7, 2006, in an SEC current report on Form 8-K, Quest Oil Corp., represented by its three remaining duly-appointed directors (augmented by two new directors appointed by the three remaining directors) disclosed their decision, by unanimous written consent, to remove William H. Stinson as a director and officer. In addition, Quest has filed with Harris County District Court (Houston) for an injunction and restraining order against Mr. Stinson and certain of his associates. We continue to regard the situation as uncertain and reaffirm our NEUTRAL rating.
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Trinity Biotech: Favorable Implications of Financing
Stephen L. Handley
April 07, 2006. Yesterday Trinity (Nasdaq: TRIB) announced that it has obtained commitments from institutional investors in the U. S. and Europe to purchase approximately 2.675 million American Depository Shares (ADS) at a price of $8.60 per share in a registered public offering, and an additional 223,460 shares are being purchased by the Company's CEO. This is a favorable development, in our view, for several reasons we discuss. We continue to view the stock as undervalued, and are retaining our year-end price target of $12 and the Strong Buy rating we have had since our report of August 19, 2005 (at a price of $6.37).
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Clearant: Maintained At Speculative Buy Rating In Update; Gamma Irradiation To Sterilize Biological Products
Sally H. Wallick, CFA
April 06, 2006. Clearant's (OTCBB: CLRI) proprietary technology, the CLEARANT PROCESS®, uses gamma irradiation to sterilize biological products. Currently, it is the only commercially available technology that inactivates all known infection-transmitting pathogens in biological products already sealed in their final packaging without affecting the functional integrity of the treated material. We believe that this technology's unique characteristics make it a compelling treatment option, strengthening the Company's competitive position and enhancing its long-term growth prospects. In addition, we believe that regulatory changes implemented last year, which require that tissue suppliers validate sterility claims, could boost demand for Clearant's services. We consider the shares appropriate for aggressive investors willing to accept the above-average risk inherent in an early-stage company that is not yet profitable.
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O2Diesel: Shares Are Up Sharply On Heavier-Than-Normal Volume. They May Be Benefiting From "Renewable And Clean Energy" Stock Appeal And A Recent Conference Presentation. We Reiterate Our Speculative Buy Rating And Are Raising Our Price Target To $2.00
Sally H. Wallick, CFA
April 06, 2006. O2Diesel (AMEX: OTD) has developed a proprietary, cost-effective ethanol-diesel fuel blend, O2Diesel(TM), which requires no significant engine modifications, can be delivered using the existing distribution infrastructure, and substantially reduces vehicle emissions. O2Diesel's share price has risen from a close of $0.65 per share on March 27 to yesterday's close of $1.32 per share. We reiterate our Speculative Buy rating on O2Diesel's shares. In addition, we are raising our price target to $2.00 per share from $1.00 per share, based on estimated revenue potential in 2011 of approximately $250 million, assuming market share of 5%.
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Sky Petroleum: Raising Price Target to $3.90
Richard R. Wolfe, CFA
April 06, 2006. we are raising our target price on Sky Petroleum (OTCBB: SKPI) shares to $3.90. Based on new information, we believe that our base-case scenario for Mubarek productivity deserves to be assigned a higher probability. The new target price is 22% higher than the most recent close (April 5, 2006) of $3.19 per share, and we therefore reaffirm our BUY rating on the shares.
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Smart & Final: Raising Price Target To $22
Jonathan H. Ziegler, CFA
April 06, 2006. Smart & Final (NYSE: SMF) announced earlier this week that Casino, who owns 56% of its stock may be selling non core assets which could include shares of SMF. For reasons discussed in our note, we are raising our price target for SMF to $22,
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Wave Systems: Wins Broadcom as Customer
David P. Soetebier, CFA
April 06, 2006. Wave Systems Corp. (Nasdaq: WAVX) announced on April 5th that it had signed an OEM Software Distribution agreement with Broadcom Corporation (Nasaq: BRCM) permitting the distribution of Wave's Embassy(R) Security Center (ESC) and Cryptographic Service Provider (CSP) software technology with Broadcom devices that include a Trusted Platform Module (TPM). We consider Broadcom a very important win for Wave abd discuss why and its potential impact. We have a Strong Speculative Buy on the shares with a 12-month target of $2.00.
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GigaBeam: 2005 Revenue Better Than Our Expectations - Progress in Sales - Bottom-line Miss Does Not Concern Market - Strong Speculative Buy Rating
David Riedel
April 05, 2006. Gigabeam (Nasdaq: GGBM) reported solid results for 2005 yesterday. In addition to the solid results, the company announced a sale of five links to the City of Sioux Falls, South Dakota. Overall the current situation with Gigabeam appears to be quite positive - Sales are accelerating, management reiterated their commitment to $25 million in revenue in 2006 and some success both internationally and with US municipalities seems to be gaining momentum. Note that our valuation does not account for significant international sales which could accelerate the company's move towards profitability - currently expected in late 2007. Reiterate Strong Speculative Buy and $22 price target.
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CORRECTED: Paulson Capital Corp.: Comments From Paulson Capital's FY2005 Conference Call; "The Corporate Finance Window Is Open"; Raising Rating To Strong Buy And Increasing Price Target
Richard W. West, CFA
April 05, 2006. Considering that Paulson Capital's (Nasdaq: PLCC) activity in the corporate finance arena was relatively limited in 2005, the generation of $1.5 million cash on an operating basis and the increase in earnings before interest and depreciation (EBITDA) was impressive. Mr. Chester Paulson, founder and Chairman of the Board, indicated on the conference call that they plan to complete one corporate finance deal per quarter over the next 12 to 18 months. In consideration of the renewed activity in corporate finance deals, the new effort by management to create investor awareness in Paulson Capital, and the fact that the company is selling at a discount to peer brokers, we are increasing our rating to Strong Buy and increasing our twelve-month price target to $10.00 per share.
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Pipeline Data: Reports Strong Growth for 2005 - Reiterate STRONG BUY Rating
David Riedel
April 05, 2006. Pipeline Data Inc. (OTCBB: PPDA), a fast-growing provider of credit card processing services, announced today very strong results for the year ended December 2005. The company saw 55% growth in revenues and a Gross Profit more than double the 2004 level. We reiterate our Strong Buy rating on the shares and expect that 2006 will be a period of continued success for the company and for Pipeline shares.
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Quest Oil: In Legal Dispute, Directors & Officers Depart; Dutton Rating Lowered to Neutral
Richard R. Wolfe, CFA
April 05, 2006. On April 5, 2006, in an SEC current report on Form 8-K, Quest Oil Corp. (OTCBB: QOIL) announced that, with the exception of President and Chief Executive Officer William Stinson, all members of its board of directors and all officers have departed the company or been suspended by the company. As a result of this filing, we have lowered our rating on shares of Quest Oil to NEUTRAL.
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PFSweb: Fourth Quarter Results In Line
David P. Soetebier, CFA
April 04, 2006. PFSweb (Nasdaq: PFSW) reported results for its December 2005 quarter that were basically in line with our expectations. Our estimated 2006 revenues are now $500 million for the combined companies (PFSweb and eCOST.com). Our prior 2006 estimate was $585 million. We maintain a Strong Speculative Buy rating on PFSweb with a 12-month price target of $3.00.
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Arcadia Resources Buy Rating Maintained In Updated Initial Coverage; National Player in Two of the Most Attractive Areas in the Medical Field
David Riedel
April 03, 2006. Arcadia Resources (OTCBB: ACDI) is rapidly growing into a national player in two of the most attractive areas in the medical field: health care staffing (including home care) and durable medical equipment (DME). Recent progress on initiatives to sell home healthcare products through Sears stores and catalogs are, we believe, a smart strategic move by the Company. Still largely a services (i.e. staffing) company, the Company is increasing its exposure to higher-margin product sales, resulting in better margins and a brighter profit outlook. While near-term earnings projections are modest, we believe conditions at Arcadia will improve markedly in 2006 and patient investors will be rewarded for the reasons we discuss in our report.
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AMPEX: Update Status Notes From Dutton Conference Presentation; Reiterate Strong Buy Rating
Richard W. West, CFA
April 03, 2006. Ampex's (Nasdaq: AMPX) presentation at the Dutton Associates "Recognizing Opportunity" Conference, this past Tuesday, March 28, 2006, presented the status of their intellectual property strategy and Recorder business. Currently, Ampex is receiving royalty revenue from digital still cameras, digital video camcorders, and DVD recorders. We review and comment.
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EasyLink: Update on EasyLink Services Financing
Paul J. Resnik, CFA
April 03, 2006. In its just filed 10K, EasyLink Services (Nasdaq: EASY) stated that it has received letters of intent for $4.3 million of a proposed $5.4 million common stock financing. While we believe it may be able to close this funding at a level below $5.4 million, this is not assured. The Company is pursuing this financing and alternative financings to meet obligations coming due on May 1, 2006 which we discussed in our March 1 Research Note.
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FORGENT: Announces Dismissal Of Xerox From The '672 Lawsuit; Strong Buy Rating Reiterated
Richard W. West, CFA
April 03, 2006. Forgent (Nasdaq: FORG) and the other parties in the '672 lawsuit are now awaiting Judge Jeremy Fogel's ruling from the Markman hearing. The just announced dismissal of Xerox is most positive and may possibly foretell the ruling from Judge Fogel. We give our take on this Xerox settlement. We reiterate our Strong Buy Rating and $5.00 per share price target.
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NutraCea: Binding Agreement With StoneBridge Pharma; Our Estimates Are Under Upward Review; Strong Buy Rating Reiterated.
Gerald F. LaKarnafeaux, CFA
April 03, 2006. NutraCea (OTCBB: NTRZ) announced that it had entered into a binding letter of intent with StoneBridge Pharma, a private company that provides specialty pharmaceutical products to chain drug stores, wholesalers, supermarkets and 33,000 independent pharmacies. We continue to rate NutraCea stock as a Strong Buy.
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O2 Diesel: Delays Filing Form 10K
Sally H. Wallick, CFA
April 03, 2006. O2Diesel (AMEX: OTD) said that it requires more time to complete its 2005 financial audit and, therefore, was unable to file its 2005 10-K by the required date of March 31, 2006. We comment.
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Pacific Ethanol: Submits Notice of Intent for Plant at Oregon Site
Paul J. Resnik, CFA
April 03, 2006. Pacific Ethanol (Nasdaq: PEIX) has indicated that, in addition to the plant it is currently building in Madera, California, it has options to purchase two sites and options to lease two sites for the construction of ethanol plants along the West Coast. We have become aware (through a search of the State of Oregon website) that on March 3 Pacific Ethanol submitted a notice of intent to submit a site certification application for a 25-acre site within the Port of Morrow Industrial Park in Boardman, Oregon. We discuss its expansion and our Neutral rating.
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Smart & Final: Announces Reviewing Option After Major Shareholder Announces Selling Noncore Assets
Jonathan H. Ziegler, CFA
April 03, 2006. Smart & Final Inc.'s (NYSE: SMF) board plans to hire financial advisers to review alternatives for the company after majority shareholder Casino Guichard-Perrachon SA announced plans to sell noncore assets. We provide our take on what SMF would fetch on a takout in today's market. A different story than 10 years ago.
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Gigabeam: Comments from JM Dutton 'Recognizing Opportunity' Conference Highlight Opportunity and Strong Outlook - Reiterate Strong Speculative Buy Rating
David Riedel
April 02, 2006. Gigabeam, a fast-growing technology company that provides a needed solution to the problem of 'last-mile' connectivity of fiber-optic cable, presented at the JM Dutton 'Recognizing Opportunity' conference last week. The presentation and subsequent break-out sessions highlighted the value and strong growth at Gigabeam. We review the Company's presentation and our strong speculative buy rating on these shares.
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Guideline (formerly Find/SVP) Presentation at JM Dutton 'Recognizing Opportunity' Conference Highlights Value - Strong Buy
David Riedel
April 02, 2006. David Walke, CEO of Guideline (OTCBB: GDLN), formerly known as Find/SVP, presented the very compelling investment case for the company at JM Dutton's 'Recognizing Opportunity' conference in San Francisco last week. We discuss the presentation and the investment case made.
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NutraCea: Reports Excellent Fourth Quarter
Gerald F. LaKarnafeaux, CFA
April 02, 2006. NutraCea (OTCBB: NTRZ) reported excellent results for the fourth quarter ending December 31, 2005. We discuss these results and reiterate our strong buy rating.
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TELKONET INC. Announces Rollout Of Its Internet System In Trendwest Resorts
Richard W. West, CFA
April 02, 2006. Telkonet, Inc. (AMEX: TKO) is in the process of finalizing its implementation plan for a broad-based rollout of its iWire System™. after successfully completing initial proof-of-concept trials in the Trendwest Resort's Worldmark Seattle Camlin resort, the Worldmark Las Vegas resort, and the Worldmark Windsor, CA resort. In our Initial Research Report, we noted that Telkonet is undergoing a necessary transition period with its MST acquisition and increasing its emphasis on the hospitality market.
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21st Century Announces Alliance With The Republic Group; Reiterating Our Strong Buy Rating
Richard W. West, CFA
March 31, 2006. 21st Century (Nasdaq: TCHC) announced on March 28, 2006, its wholly-owned subsidiary, American Vehicle Insurance Company (American Vehicle), reached an agreement in principal with The Republic Companies Group, Inc. (Nasdaq:RUTX:$17.50) that will enable American Vehicle to underwrite general liability business and other commercial lines in various states through affiliates and/or subsidiaries of The Republic Group. 21st Century's strategy is to emphasize its general liability underwriting. We continue to be impressed by 21st Century's management adjusting their underwriting strategy to concentrate on the profitable areas of insurance, that is away from property and casualty. We reiterate our Strong Buy Rating and reaffirm our 12-month price target of $24.00 per share.
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We Continue to Press our Case Initiated Several Months Ago
That Metals Prices will Ratchet Higher
Les W. Childress
March 31, 2006. We are raising our near term price expectation for gold from $600 to $700 per ounce. A $750/oz level sometime in 2006 is not out of the question. Silver could reach $13/oz; copper $3.00/lb; platinum $1200/oz; Uranium $50/lb.
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CytoGenix: First Purchase Order for Their Proprietary Synthetic DNA Termed synDNA
William R. Prather, RPh, MD
March 31, 2006. On March 30, 2006 CytoGenix (OTCBB: CYGX) announced they have received their first purchase order for their proprietary synthetic DNA termed synDNA from Aldevron, a private supplier of DNA for research and clinical applications. We believe further announcements similar to this one are forthcoming which strengthens our recommendation of SPECULATIVE BUY on the common stock of CytoGenix.
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Comments By JOYSTAR, INC. At Dutton Associates Conference; Strong Speculative Buy Rating Reiterated
Richard W. West, CFA
March 31, 2006. Joystar (OTCBB: JYSR) brought investors up to date at the March 28, 2006, Dutton Associates Conference. In consideration of the continued growth in professional agent count, the additional booking possibilities for agents, higher gross margins, and the large stock holding by the major individual investor, we increased our 12-month price target to $1.70 on March 17, 2006. We reaffirm the $1.70 target and reiterate our Strong Speculative Buy Rating.
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LJ International: Highlights Of Growth Strategies Presentation At Dutton Conference; Retail Business Continues Aggressive Expansion in China
Sally H. Wallick, CFA
March 31, 2006. LJ International (LJI), a Hong Kong- based vertically integrated jewelry wholesaler and retailer, made a presentation at the Dutton Associates "Recognizing Opportunity" Small Cap Conference in San Francisco on March 28, 2006. Discussed, and we review in this note, its position as a leading jewelry wholesaler and the exciting growth potential of the Company's newest business, jewelry retailing in China, which began operation in late 2004. The core wholesale business continues to grow, generating revenue of $92.1 million in 2005, up from approximately $77 million in 2004, while ENZO, the China retail division, is gaining share in China and is on track to achieve profitability in 2007. In recent years, the Company has successfully diversified its customer base, which now includes two-thirds of the largest U.S. jewelry chains, the three largest U.S. home-shopping networks, and some of the world's largest retailers. We reiterate our Strong Speculative Buy rating on LJI's shares,
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Neurobiological Technologies: Presentation At Dutton Conference Highlights, And We Comment Why We Feel Investment Community Is Wrong On Viprinex And Upside Potential of Shares
William R. Prather, RPh, MD
March 31, 2006. Neurobiological Technologies, Inc. (Nasdaq: NTII) presented at Dutton Associates' "Recognizing Opportunity" Small Cap Conference in San Francisco at the St. Regis Hotel. From the questions and comments noted during the conference we are left with the impression the investment community remains skeptical about the clinical success of NTI's Viprinex. NTI recently announced the initiation of a second Phase III clinical trail for the drug in acute ischemic stroke. We disagree with this perceived impression and discuss why, and the upside potential of the shares.We are maintaining our recommendation of STRONG SPECULATIVE BUY with a price target of $8.
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Nymox: Observations On Presentation At Dutton Conference; Reiterate Strong Speculative Buy Rating
William R. Prather, RPh, MD
March 31, 2006. On March 28, 2006 Nymox Pharmaceutical Corporation (Nasdaq; NYMX) presented at Dutton Associates' "Recognizing Opportunity" Small Cap Conference in San Francisco at the St. Regis Hotel. Despite the rise of the common stock to approximately $3.85 share we are maintaining our target price of $6.25 and our recommendation of Strong Speculative Buy. This recommendation is primarily related to the potential of the Company's NX-1207 for benign prostatic hyperplasia (BPH).
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O2Diesel: Changes Accounting Firms and Names Independent Director With Strong Background in Biofuels.
Sally H. Wallick, CFA
March 31, 2006. O2Diesel )AMEX: OTD) recently made two announcements of significance: a change in the Company's public accountant and the appointment of a new independent director. O2Diesel also announced the addition of Gerson Santos-Leon to the Board of Directors as an independent director. Mr. Santos-Leon is the Director of Research and Development Corporate Director for Abengoa Bioenergy R& D. We reiterate our Speculative Buy rating on O2Diesel's shares.
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Pacific Ethanol Announces Delays in Completing 2005 Audit; Extending 10K Filing Date; Finalization of Financings Now Expected By April 17; Projected Plant Capacity Increased; Price Target Raised to $21; Rating Remains
Paul J. Resnik, CFA
March 31, 2006. Pacific Ethanol, Inc. (Nasdaq: PEIX) announced today that "due to delays in completing its 2005 audit, the Company will extend the filing date for its annual report on Form 10-KSB with the Securities and Exchange Commission." We anticipated that the 10K would be filed very close to the deadline so that, while this extension is somewhat disappointing, it is not particularly surprising. It did postbone closing the debt and equity financing for the Company's ethanol production facility in Madera County, California. With regard to other developments, the Company indicated during its presentation at the Dutton Associates "Recognizing Opportunity" Small Cap Conference in San Francisco on March 28, 2006 that rather than build five facilities with 35 million gallon per year guaranteed production, it was increasing its planned capacity which we discuss. On the basis of this adjustment, we are tentatively increasing our 2008 earnings per share estimate from $1.06 to $1.21 and our 12-month price target from $18.40 to $21.00. While we are maintaining our Neutral rating at this time, we continue to maintain a positive view of Pacific Ethanol's long-term potential.
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Quest Oil Updates Strategy at Dutton Recognizing Opportunities Conference
Richard R. Wolfe, CFA
March 31, 2006. On March 28, 2006, Quest Oil Corp. (OTCBB: QOIL) CEO Bill Stinson delivered a strategic update on his company's Alberta and Texas development drilling programs, as well as the company's proposed acquisition of Longleaf Petroleum. Speaking before investors and analysts at the Dutton Associates' Recognizing Opportunities Conference, Mr. Stinson outlined plans for at least four additional wells in Quest's Acadia North Field near Arneson, Alberta and several wells in the company's Hawkeye-Midkiff Field in Eastland County, Texas. We have a STRONG SPECULATIVE BUY rating on shares of Quest Oil at a 12-month target price of $0.90, and the stock has recently traded at $0.38 per common share.
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OTDiesel: CEO Highlights Attributes of O2Diesel's Ethanol/diesel Products at Dutton Conference. Speculative Buy Reiterated.
Sally H. Wallick, CFA
March 30, 2006. O2Diesel's (AMEX: OTD) Chief Executive Officer, Alan Rae, presented at the Dutton Associates "Recognizing Opportunity" Small Cap conference in San Francisco on March 28. O2Diesel Corporation has developed a proprietary, cost-effective ethanol-diesel fuel blend, O2Diesel(TM), which requires no significant engine modifications, can be delivered using the existing distribution infrastructure, and substantially reduces vehicle emissions. In his presentation, Mr. Rae provided an overview of the key attributes of the Company's additive technology and why it appears to be positioned for market share gains and growth. Key points about the Company's technology presented are reviewed in this note. We reiterate our Speculative Buy rating on O2Diesel's shares. In 2005, O2Diesel made strides toward commercializing its products in the U.S. and Brazil and positioning the Company for growth in Europe, and we expect it to make additional gains in 2006 and beyond.
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AP Pharma: Comments On FY 2005 Results; Phaase III Trials For APF530
Stephen L. Handley
March 29, 2006. We have ben asked about A.P.Pharma's (Nasdaq:APPA) full year results, which were reported earlier this month. These results were quite similar to the model carried in our last report, dated February 8. Recall that the investment thesis for the stock relates primarily to prospects for the Company's leading compound, APF530. The planned use of this compound is for the prevention of acute and delayed nausea and vomiting following chemotherapy, a U.S. market that currently approximates $1.0 billion. With the encouraging Phase II data in hand and clarity from the FDA about the protocol for the Phase III program, increased attention is now being given to obtaining an attractive partner to develop and eventually market this compound. We continue to rate the stock a Strong Speculative Buy, with a year-end price target of $3.00 per share.
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DXP Enterprises: Reducing To Neutral Rating As A Result of Price Rise; Reviewing New Target Price
Paul J. Resnik, CFA
March 29, 2006. DXP Enterprises (Nasdaq: DXPE) price has risen sharply and presently we are lowering our rating to neutral. Company is doing well and we are not ruling out increasing our target price.
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Sky Petroleum: Mubarek H-2 Well Near Target Depth; Price Target Raised to $3.15
Richard R. Wolfe, CFA
March 29, 2006. Sky Petroleum (OTCBB: SKPI) announced that Crescent Petroleum Company International Limited, the operator of the Mubarek Field offshore Dubai, is at a depth of 13,845 feet in drilling the company's H-2 well, just above the targeted Ilam/Mishrif reservoir. Testing and completion of the well will take place during April with production startup anticipated in mid-May. We have had a BUY rating on shares of Sky Petroleum at a 12-month target price of $2.75, and the stock's most recent close (March 28) was at $2.60. Based on a preliminary review of updated cash flow projections for the company, we are increasing our target price to $3.15 and maintain our BUY rating. We expect to issue a full update on Sky Petroleum during the next two weeks, following the company's expected annual filing. The forthcoming update will include a comprehensive valuation analysis.
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LJ International Inc. (JADE) Fourth Quarter review. Strong Speculative Buy Rating Reiterated
Sally H. Wallick, CFA
March 27, 2006. In conjunction with reporting final result for 2005, management provided guidance for the first quarter of 2006. It projects first quarter revenue of $21-22 million and diluted earnings of $0.02 per share. This earnings guidance is in-line with our estimate, although the revenue estimate is slightly above our projection.Based on this guidance, we are maintaining our $0.25 per share full-year earnings estimate for the time being. However, we are out of the office at present and will review our estimate in more detail when we return later in the week. In the meantime, we reiterate our Strong Speculative Buy rating on LJI shares. Factors supporting our recommendation include the following:
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Elron to present at Dutton at Dutton Associates Spring 2006 Institutional Conference
Barry Raeburn
March 26, 2006. Elron Electronic Industries will present at Dutton Associates Spring 2006 Institutional Conference. The Conference will be held Tuesday, March 28th in San Francisco at The St. Regis Hotel. The format of the conference has each company giving short morning presentations followed by Afternoon Breakout Sessions with the individual company management teams. We encourage investors to attend the breakout session to learn more about Elron's strategy and private company holdings. After adjusting for the September 2005 dividend, Elron stock price is trading slightly below the price at our initial report. There are many positive catalysts in the form of news flow, product developments, and customer activities within portfolio companies that could positively impact Elron's valuation. The discount to NAV is significant and has widened to 21.5% from 16.5% in early September before the dividend distribution. We maintain our Strong Buy rating and 12-month price target of $15.
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George Foreman Enterprises: Circle Group Shares Up 27% on 5x Avg. 30 Day Volume
Gerald F. LaKarnafeaux, CFA
March 25, 2006. The stock of George Foreman (OTCBB: GFME) was not impacted by the stock performance of Circle in spite of Foreman's potential vested interest in Z-Trim's performance. On March 24, 2006 the stock of Circle Group Holdings (Z-Trim) increased by 27% on volume of 856,000 shares which is five times its 30 day average volume. We continue to rate George Foreman Enterprises as a Strong Speculative Buy.
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Elron Electronic Industries Strong Buy Rating; A Compelling Opportunity, In Our View
Barry Raeburn
March 24, 2006. Based in Tel Aviv, Israel, Elron is a leading multinational technology holding company. Since 1962, Elron has been a major force in the development and commercialization of Israel's technological discoveries in the defense electronics, telecommunications, semiconductor and medical device sectors. In recent years, the Company has continued and accelerated its focus in the high-growth segments of the medical devices, telecommunications, and semiconductor industries. Elron reported 2005 net income of $47.3 million, or $1.60 per share. Net income for the year was driven by the sale of holdings in Partner Communications and Oren Semiconductor, as well as the successful IPO of NetVision on the Tel-Aviv Stock Exchange. Net income for the year is reduced by Elron's consolidated losses in its portfolio companies; Elron's share of losses in portfolio companies was reported as $23 million for 2005. At an approximate 22% discount to NAV, we believe that the investment community is overly discounting Elron's operations and devaluing its private company portfolio to a great extent. At current price levels, Elron represents a compelling opportunity, in our view. In our view, the current NAV discount will narrow and possibly turn into a premium over time.
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Neoprobe Lowered to Neutral Rating; Delays in Milestone Announcements Suggests 2006 Will Be A "Quiet" News Year; Still Enamored By The Technology
William R. Prather, RPh, MD
March 24, 2006. In September 2005 we revised our investment rating on the common stock of Neoprobe (OTCB: NEOP) from Neutral to Strong Speculative Buy on the assumption that the Company would be announcing a development/marketing partner for their radio-immunoguided surgery (RIGS®) technology. Although we are still quite enamored by the technology and believe that it is capable of changing the standard of care in patients with carcinoma of the colon, we now believe that an announcement of a development/marketing collaboration will not be forthcoming over the near term. In fact, we now estimate that a partner for RIGS will not materialize until the first half of 2007. We believe that Neoprobe's market value responds to milestone announcements. We reason that the Company's revenue-producing product portfolio in gamma radiation-detection devices and the Quantix™ line of blood flow monitors do not contain blockbuster revenue potential and the reason to own Neoprobe's stock is their R&D products of RIGS and Lymphoseek™. Our revised estimates of milestone timelines suggest that the Company will have a paucity of announcements over the next year and has, therefore, promoted our investment rating revision from Strong Speculative Buy to Neutral.
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21st Century Holding Company Strong Buy Rating In Update Coverage; Strong Record of Growth and Dividend Increases
Richard W. West, CFA
March 23, 2006. Although Florida was struck by three hurricanes, Dennis, Katrina, and Wilma, 21st Century Holding Company (Nasdaq: TCHC) reported strong results for FY2005. The new reinsurance agreement mitigated the damages to 21st Century's earnings. The report provides the summary of our rationale for our Strong Buy rating. These factors include 1) Until the hurricane-racked year of 2004, 21st Century had a history of solid growth in revenues, net premiums earned, and net income for the past five years. 21st Century was back on its growth track for FY2005; 2) For the fourth quarter of 2005, total revenue increased 21.8% to $25.1 million while net income in the fourth quarter FY2005 was $1,418,991, or undiluted EPS of 0.22 per share; 3) 21st Century's management believes "that the 2006 hurricane season will moderate more to the norm, which is typically a 50% chance of one hurricane striking Florida during any given hurricane season."; and 4) 21st Century also has a strong record of growth in dividend payments. Dividends have increased every year since paying $0.10 in 2000, to $0.32 in 2004. We reiterate our Strong Buy rating and reaffirm our 12-month price target of $24.00 per share.
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Gigabeam: Nasdaq Listing Effective March 27th An Impressive Accomplishment; Preview of 2005 Results and 2006 Outlook; Reiterate Strong Buy
David Riedel
March 23, 2006. Gigabeam (OTCBB: GGBM) announced today that they have been approved for NASDAQ listing effective Monday March 27th. We consider this a major accomplishment for a company like this still quite early in their life cycle. This will, we believe, bring additional investors into the stock and support the move in the shares to correct the significant undervaluation of Gigabeam shares.The company is expected to release results for the period ended December 31 with the filing of their 10-K expected some time next week, and we review what we are looking for. We reiterate our Strong Speculative Buy rating on the shares.
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Guideline (frmly FIND/SVP) Posts Better than Expected Revenues and In-line EPS for 4Q06 - Reiterate Strong Buy
David Riedel
March 23, 2006. Guideline (OTCBB: GDLN) (formerly known as FIND/SVP), a leading provider of custom business research, post revenue for the fourth quarter ended December 31, 2005. Total revenue was $11.5 million up 25% from the year ago period. This was higher than our expectation of $10.6 million. We will wait for the conference call later today to determine which of the company segments drove this upside.We reiterate our Strong Buy rating and price target of $2.40. Additional details to follow a conference call this afternoon EST.
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ImageWare: ImageWare Reports 4Q 2005 Results, First Reaction
Rafael K. Kapelinski
March 23, 2006. ImageWare's (AMEX: IW) 4Q 2005 adjusted results were better than our expectations. However, the results included a few extraordinary items, which have distorted the picture. On balance, we believe that the market should like the results, although the adjusted results indicate that the Company has been hard pressed to maintain the margins. We reiterate our Buy rating as we believe that the recent distribution deals should allow the Company to meet our 2006E revenue estimate of USD 10.03 million (+5.3%).
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Vita Food Products: Stock Strong On No News; Maintaining Our Price Target and Speculative Buy Rating
Gerald F. LaKarnafeaux, CFA
March 23, 2006. Vita Food Products (AMEX: VSSF) stock is higher on the day (Thursday March 23rd) by approximately 19%. The stock traded as high as $3.25 per share up from the prior day close of $2.68 per share. It closed at $3.19 per share.
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Electric City Corp.: Reports FY2005 Results; Revenue Doubles But Loss Increases; Strong Speculative Buy Rating Reiterated And Lowering Price Target
Richard W. West, CFA
March 22, 2006. Electric City (AMEX: ELC) released its FY 2005 results.Revenue for FY2005 increased 100% to approximately $4.8 million while operating loss for FY2005 increased 39% to a loss of approximately $6.3 million. Net loss available to common shareholders for FY2005 decreased 11% to approximately $8.7 million. Basic and diluted loss per common share for FY2005 was $(0.18), compared with $(0.25) for Fy2005. Electric City needed to change its business plan. While many customers of ComEd have been enrolling in its 50 megawatt VNPP program, Electric City has only benefited by receiving two megawatts of reduced electricity from the enrolled customers. Mr. David Asplund, the new CEO, discussed the new direction in the year end conference call.
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IntegraMed America Rating Maintained At Strong Buy; Only Public Company With Exposure To Treating Infertility; Tremendous Operating Leverage in the Business Model
David Riedel
March 21, 2006. IntegraMed America (Nasdaq: INMD) is the leading supplier of physician practice-management products and services for clinical practices involved with treating infertility. IntegraMed supports its physician practices with strong consumer-oriented marketing, software systems to enhance effectiveness and efficiency, and bulk buying of drugs and lab supplies to lower costs. Treatment for infertility is a fast-growing segment of U.S. health care, and IntegraMed is the only public company with exposure to this business. Tremendous operating leverage in the business model has begun to materialize and will, we believe, drive strong growth in profits in 2006 over 2005. Growth is being driven by initiatives such as the Shared Risk Refund program which allows consumers to pay an upfront, set amount for as many as six in vitro fertilization (IVF) cycles with the guarantee of a refund of up to 100% of their money if they are not successful in having a baby. Currently trading at 16x our 2007 estimate for earnings per share (EPS) of $0.60, we believe the shares are undervalued. While full recognition of the earnings potential may take a couple of quarters to materialize, we estimate the shares are worth $15.00 per share and reiterate our Strong Buy.
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INX: Reports Fourth Quarter Results
David P. Soetebier, CFA
March 21, 2006. INX (AMEX: INX), a leading provider of voice over Internet protocol (VoIP) products and services reported fourth quarter revenues that were roughly $8.0 million below our estimate and below the low end of management's guidance. The revenue shortfall contributed to a $0.02 loss per share versus our estimate of profitability. For our first quarter ending March 31, 2006 we now expect revenue of $29 million and an operating loss of $0.05 per share. For the full 2006-year we estimate revenue growth of 20.5% to $146.5 million and earnings per share of $0.15 to $0.20 reduced from our estimate of $0.46. In addition, we are reviewing our 2007 estimate. A key to our positive outlook is the Company's divestiture of its two non-core businesses and its potential to grow internally and through acquisitions. We will have additional details in an upcoming Update on INX.
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American Software Signs Key Agreement with SAP AG
David P. Soetebier, CFA
March 20, 2006. American Software's (Nasdaq: AMSWA) 88% owned subsidiary Logility (Nasdaq: LGTY) recently announced that it was named an SAP® Business One Partner to provide supply chain solutions for the small and midsize business market in the United States. We view this agreement as a very positive development for Logility. We have had some concern that SAP would enter this market on its own and pose a competitive threat to DMI in this market. American Software is rated a Strong Buy with a target of $8.00.
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ImageWare: Raises USD 1.5 Million in Convertibles, Provides Business Update, Reiterate Buy Rating and Price Target of USD 3.25
Rafael K. Kapelinski
March 20, 2006. ImageWare (AMEX: IW) has announced the closing of a $1.5M, 8% one year non-convertible senior secured loan. Also, the Company has provided a business update. ImageWare's common shares are trading at 3x 2006E sales, which represents a slight discount to the peers in the broadly-defined Homeland Defense sector. We reiterate our Buy rating and price target of USD 3.25.
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LJ International: Will Report Earnings And Present At The Dutton Associates Small Cap Conference Next Week. We Expect An Upbeat Presentation, Including More Color On The Company's Fast-Growing Retail Business. Strong Speculative Buy Reiterated.
Sally H. Wallick, CFA
March 20, 2006. LJ International (Nasdaq: JADE) is scheduled to release fourth quarter and full-year 2005 results before the markets open on Monday, March 27. In early February, LJI raised fourth quarter revenue guidance to more than $32 million (from previous guidance of $26-$27 million) and projected diluted earnings of $0.08 per share, up from $0.05 per share a year earlier. Full-year 2005 revenue and fully diluted earnings are projected at more than $95 million and $0.23 per share (versus $0.22 per share in 2004), respectively. On March 28, LJI will make a presentation at Dutton Associates "Recognizing Opportunity" Small Cap Conference in San Francisco. We expect an upbeat presentation, highlighting the ongoing success of the Company's core jewelry wholesaling business, and providing more color on the recent performance of and long-term prospects for its fast-growing retail business in China. We reiterate our Strong Speculative Buy rating on LJI's shares.
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Telkonet: Files Sec Form; Revenue Improved, But More Volume Required; Speculative Buy Rating Reiterated
Richard W. West, CFA
March 20, 2006. The financial results for Telkonet (MAEX: TKO) for the fourth-quarter and FY2005 were lower than our estimates; however, the total revenue growth, the growth for product and rental revenues, the increased margins, bodes well for benefiting future revenue and earnings growth. The lower than expected revenue points out the need for Telkonet to increase its penetration in the multi-dwelling unit (MDU) and hospitality market and to have the opportunity to begin creating revenue from major defense contracts. Our estimates for FY2005 and FY2006 were overly aggressive. In view of the current major changes for Telkonet, we are at this time suspending our estimates for 2006. The potential for increased revenue and earnings for Telkonet in the coming quarters and years is great. We will monitor the progress by MST, Telkonet's roll-out of new defense contracts, and its continued penetration of the MDU and hospitality market. We reiterate our Speculative Buy Rating and our $6.25 price target.
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American Software: Strong Fiscal Third Quarter Reported
David P. Soetebier, CFA
March 19, 2006. American Software (Nasdaq: AMSWA) exceeded our revenue estimate for its fiscal 2006 third quarter and beat our earnings per share estimate by $0.03 per share. The better than expected results came primarily from Logility (LGTY - $10.42 - Nasdaq) its 88% owned subsidiary coupled with lower expenses and higher "other income" at the corporate level. Based on the better than expect quarter we raised our fiscal 2006 (April) estimate by $0.03 to allow for the better than expected quarter. The shares are rated a Strong Buy with a target of $8.00. We will have additional details on our outlook in an upcoming Update on the Company.
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O2Diesel: Fourth Quarter Results Previewed; Progress Toward Commercializing Its Ethanol/Diesel Fuel Blend; Reiterate Our Speculative Buy Rating And Set A Price Target of $1 Per Share.
Sally H. Wallick, CFA
March 19, 2006. We expect O2Diesel (AMEX: OTD) to report results for the three months ended December when it files its 10-K in late March. We anticipate a quarter similar to those reported in recent periods, with minimal revenue and a modest loss per share of perhaps $0.04 or $0.06. During 2005 and thus far in 2006, O2Diesel has made progress toward commercializing its ethanol-diesel fuel blend, O2Diesel(TM), bringing on new customers in the U.S., Brazil, and Australia and adding a major partner/investor, Abengoa Bioenergy R&D, to help development the European market. We will provide a more detailed update following the release of the 10-K. In the meantime, we reiterate our Speculative Buy rating on the Company's common stock and are initiating a price target of $1.00 per share.
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Quest Oil Rating Strong Speculative Buy In Initiating Coverage
Richard R. Wolfe, CFA
March 17, 2006. Quest Oil Corporation (OTCBB: QOIL) has assembled an attractive portfolio of oil and natural gas assets in Alberta, Canada, and Texas, well balanced between high-potential, higher-risk drilling and low-risk, production-ready properties coming on-line at very little capital cost. Management has extensive industry experience that has been instrumental in the Company's rapidly accelerating pace of development, and we expect continued asset and production growth. We estimate that cash flow turned positive in the first months of 2006, and we expect the Company's fourth-quarter results (for the period ended March 31, 2006) to be near break-even, with solid profitability in subsequent quarters. Our cash-flow projections indicate fast-paced growth through 2006 and 2007. By 2008, the Company should be generating discretionary cash flow well in excess of currently estimated capital expenditures. In particular, we estimate that in 2008 and subsequent years, Quest should have approximately $20 million per year available for reinvestment or for share buybacks. Our valuation of Quest common shares, employing the discounted cash-flow method, indicates a $0.90 share price, 200% higher than recent levels for the shares.
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Arcadia Resources - Share Price Strength Limits Upside - Raising Price Target; Lowering Rating from Buy to Neutral; No Diminished Enthusiasm for Arcadia's Business Model and Prospects
David Riedel
March 17, 2006. We are lowering our rating on Arcadia Resources (OTCBB: ACDI) from BUY to HOLD after tremendous strength has propelled the share price up to the level of our price target. Even with an increase to our target price, upside to that target is limited and justifies a Neutral rather than Buy rating. We are raising our price target to $3.75 which represents 25x our $0.15 EPS estimate for FY07 (the year ending March 2008). We are looking for the Company to post EPS of $0.04 in the fiscal year ending March 2007 and $0.15 in the year ending March 2008. Comparable companies trade at an average P/E of 25x.
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Clearant: Earnings Review. New Sales Initiative Announced. Company Well Positioned To Grow Revenue And Gain Market Share. Estimates And Target Lowered. Speculative Buy Reiterated.
Sally H. Wallick, CFA
March 17, 2006. Clearant (OTCBB: CLRI) reported mixed fourth quarter results. Licensing fee revenue increased substantially year over year; expenses were well controlled; and the $0.09 per share operating loss was well below last year's $0.67 per share loss. In conjunction with the earnings report, management announced several strategies aimed at gaining market share and accelerating revenue growth, including marketing Clearant's sterilization service to medical device manufacturers (particularly those whose products incorporate a biologic) and the therapeutic biologics market; introducing a pre-mixed radioprotectant solution to tissue bank customers, making it easier for them to utilize Clearant's sterilization process; and acting as a processor's representative by purchasing and treating some tissue with the Clearant Process(R), then marketing it directly to end users. We reiterate our Speculative Buy rating on the shares but lower our 12 month price target to $3 from $5.50.
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George Foreman Enterprises: Extension of Definitive Agreement Completion With Circle Group Until April 28th
Gerald F. LaKarnafeaux, CFA
March 17, 2006. George Foreman Enterprises (OTCBB: GFME) and Circle Group Holdings (ASE: CXN) have filed a second extension of the definitive agreement entered into on November 23, 2005. We comment on the extension and continue to rate Foreman stock as a Strong Speculative Buy.
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Joystar: Cruise Booking Engine Up And Running; Professional Agent Count Up To 3,700; Strong Speculative Buy Rating Reiterated - Raising Price Target
Richard W. West, CFA
March 17, 2006. Joystar (OTCBB: JYSR) announced, on March 16, its private label cruise-booking engine went live on over 3,700 private label and co-branded affiliate travel agent Web sites. The cruise-booking engine allows the 3,700 professional agents to have direct access to cruise booking and vacation pricing values 24/7. The common stock of Joystar has been increasing since our Updated Research Report of March 7, 2006, when we upgraded our rating to Strong Speculative Buy and established a twelve-month price target of $1.20. Joystar continues to increase its agent count and to provide additional booking possibilities to its agents. Considering the continued growth in professional agent count, the additional booking possibilities for agents, and the large holdings by the major individual investor, we are maintaining our Strong Speculative Buy rating and raising the price target to $1.70 per share.
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Touchstone: Buy Reiterated. First Quarter Revenues Up Better-Than-Expected 16%, But Bottom Line Is Disappointing. Company In Transition And Experiencing Growing Pains. Expect Stronger Results Later In The Year. Estimates And Target Lowered.
Sally H. Wallick, CFA
March 17, 2006. Touchstone Applied Sciences' OTCB: TASA) better-than-expected first quarter revenue growth of 15.9% year over year was offset by margin and expense pressures, resulting in a first quarter loss of $0.05 per share, well below the prior year's $0.04 per share and our $0.04 per share estimate. During fiscal 2005 and continuing in fiscal 2006, Touchstone's business has been changing in response to new customer needs and preferences arising from the federal government's No Child Left Behind legislation. It has made two acquisitions that expanded its service capabilities, strengthened its management team, and bid on larger, more complex contracts that require a full array of services including printing, distribution, scanning and scoring. Touchstone's quarter-end backlog was $19 million. All in all, we believe that Touchstone was in a strong financial position at quarter end. Our Buy rating is reiterated.
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AMPEX: Reports Preliminary Results For 4TH Quarter And Year 2005; Reiterate Strong Buy Rating
Richard W. West, CFA
March 16, 2006. Ampex's (Nasdaq: AMPX) fourth-quarter and FY2005 revenue and revenue margin results were in line with our estimates; however the higher selling and administrative expenses due to legal and accounting fees, including Sarbanes Oxley related costs resulted in $4.8 million expenses in the fourth-quarter, vs. our estimate of $2.4 million and $15.9 million expenses in FY2005, vs. our estimate of $13.5 million. The day after the fourth-quarter and FY2005 results news release and conference call, Ampex's common stock sold down sharply $3.20 to $19.50 on 88,000 shares. As we have stated before, we will not attempt to explain the vicissitudes of day-to-day trading, however, we believe that the selling was an overreaction to the lower earnings and the absence of any announcement for license covering the feed forward quantization patents. Investors are apparently becoming impatient for substantive news of license agreements. It appears that investors are ignoring the increased Recorder business and that licensing revenues from digital camcorders will increase in 2006, and are discounting any new licenses or any possible settlement with Eastman Kodak (EK:NYSE- $29.19).
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International Barrier Tech: Why Undervalued
Gerald F. LaKarnafeaux, CFA
March 16, 2006. In spite of strong underlying fundamentals, the stock price of International Barrier (OTCBB: IBTGF) has traded in the low seventy cents area - the level we initiated at approximate six months ago. Our target price at that time was, and remains, $1.34 per share (adjusted for more shares outstanding). We expect this target price to be realized within the next six months as the market recognizes the progress the Company has made. We review in our note the fundamental progress made by the company, and believe it will acjieve our target price of $1.34 over the next six months.
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Pharmos: Announces Intent to Acquire Vela Pharmaceuticals; Expanding Pipeline with Later Stage Products; Strong Speculative Buy Reiterated
William R. Prather, RPh, MD
March 16, 2006. On March 15 2006 Pharmos Corporation (Nasdaq: PARS) agreed to acquire closely held Vela Pharmaceuticals of Lawrenceville, NJ. VelaPharm has three products; two of which are in the midst of Phase II clinical trials and one that is preclinical. The lead product being acquired in the acquisition, R-tofisopam, is being developed for a variant of irritable bowel syndrome (IBS). Other products Pharmos acquires in the deal includes VPI-013, in Phase II trials for the treatment of depression, and tianeptine, a follow-on to R-tofisopam, that has been found to be beneficial in IBS preclinically. Our initial impression of the transaction is that this is favorable for Pharmos. Based on our initial analysis of this announcement, we are reiterating our investment rating on the common stock of Pharmos of Strong Speculative Buy with a 12-month price target of $3.75.
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Wave Systems: Fourth Quarter Results Reported
David P. Soetebier, CFA
March 16, 2006. Wave Systems (Nasdaq: WAVX) reported fourth quarter 2005 revenues of $348,000, compared to our estimate of $500,000 and $335,000 in the September 2005 quarter. The fourth quarter 2005 loss came in at $4.5 million or a loss of $0.05 per share compared with a loss of $4.4 million that was also a $0.05 per share loss so we did not show sequential improvement. We believe sequential changes in quarterly results are the best way to review company progress in a developing market. In summary, Wave made progress in 2005 total and the fourth quarter in product development and customer agreements but volume has not yet risen to a meaningful level. Wave management did state that their preliminary expectations are that in excess of 50 million PC's or motherboards that include Wave's Trusted Computing software could be shipped by Wave's current OEM partners over the next three years. As a leading provider of trusted computing solutions, Wave is targeting a large market opportunity. However, because the rate of adoption of this technology is unknown, we believe it is extremely difficult to develop an accurate earnings forecast. Consequently, for those investors willing to consider an investment that offers the potential for significant appreciation versus the risk that the Company may go out of business if its products are not widely adopted, we believe Wave offers strong speculative appeal. Consequently, we have a Strong Speculative Buy on the shares with a 12-month target of $2.00.
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Lantronix: Raised On Basis Of Price To Speculative Buy Rating; A Leader in M2M Connectivity Industry
David P. Soetebier, CFA
March 15, 2006. We believe Lantronix (Nasdaq: LTRX) offers investors the most leveraged way to participate in the developing machine-to-machine (M2M) connectivity industry, with 69% of its revenues from M2M sales (December 2005 quarter). Although the industry is still in the development stage, Lantronix already offers a broad product line and has a highly experienced management team that we believe can capitalize on this market opportunity. We believe investors have failed to value the Company relative to this growth potential. We have raised our rating on Lantronix to Speculative Buy from Neutral on a price basis. At the recent price of $2.16 the shares have declined to a point where we again consider the price attractive relative to our 12-month target of $2.50.
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Nymox Pharmaceutical: Strong Speculative Buy Rating In Update Coverage; NX-1207 on Track to Enter Phase III Clinical Trials
William R. Prather, RPh, MD
March 15, 2006. As mentioned in our initial report in November 2005, we believe a major reason to invest in Nymox Pharmaceutical Corporation (Nasdaq: NYMX) is related to the potential of the Company's NX-1207 for benign prostatic hyperplasia (BPH). Our monitoring of the clinical development of this compound indicates that the product is on track to enter Phase III clinical trials in latter 2006. In two completed trials in the U.S. to date, the drug has shown highly significant efficacy without significant adverse side effects or safety problems. Additionally, we believe a marketing collaboration for NX-1207 could be announced even before these Phase III trials are initiated. Based on the assumptions that Nymox will announce a marketing partner over the near term and will be in Phase III clinical trials next year at this time, we are maintaining our 12-month price target on the common shares of $6.25 and our rating of Strong Speculative Buy.
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DXP Enterprises Price Target Raised to $33.30 Based on Preliminary 2007 EPS Estimate; Rating Revised from Strong Buy to Buy Following Sharp Price Advance
Paul J. Resnik, CFA
March 15, 2006. DXP Enterprises' (Nasdaq: DXPE) shares rose 14.4% to $28.20 yesterday on volume of 720,000 shares. Our contact with the Company did not uncover any new fundamental developments, and we believe the share advance may reflect technically-based buying following the shares move to a new high. We review our preliminary estimate for 207. Our new price target, based on our very preliminary 2007 EPS estimate, and an 18 price/earnings multiple, which we discuss in the note, is $33.30. This target, 18% above yesterday's close, justifies a Buy, not a Strong Buy, rating on the stock based on Dutton Associates' rating parameters.
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FIND/SVP - Business Information Provider Changes Name to Guideline - Preview of Dec 31, 2005 Quarterly Earnings - Reiterate Strong Buy
David Riedel
March 15, 2006. FIND/SVP (OTCBB: FSVP) announced yesterday that it has changed its name to Guideline. The name change is expected to reflect the company's shift from traditional on-demand secondary research to a full complement of business consulting and information services. The company is scheduled to report their earnings for the quarter ended Dec 31, 2005 on March 23. The most important trends to monitor in the results will be the on-going integration of the acquired operations and some measure of management's success in cross-selling the various services. Now that the company has grown itself into a major business consulting provider, having the full suite of services becomes a significant part of the offering. We maintain our price target of $2.40 (more than double the current level) and our Strong Buy rating.
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Integramed: Raising Rating to Strong Buy on Recent Weakness and Brighter Outlook
David Riedel
March 15, 2006. We believe that Integramed (Nasdaq: INMD) is being significantly undervalued by the market following a 23% decline year to-date. There has been no recent news other than the posting of above expectation results for the quarter ended Dec 31. We are raising our rating from Neutral to trong Buy and our in the process of raising or estimates for 2006. Currently trading at a P/E of 15x our 2006 EPS estimates, we believe significantly undervalues this high-quality company that provides one of the only ways to buy exposure to the fast-growing infertility field in the U.S. Raising rating to Strong Buy and in the processof raising our target price.
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Pathmark Stores: Announcement Reflects a New Direction Management is Taking
Jonathan H. Ziegler, CFA
March 15, 2006. Pathmark Stores (Nasdaq: PTMK) has awarded a contract to Northern Power to provide three turnkey photovoltaic (PV) systems to Pathmark's Garwood, Elizabeth, and Lawnside, New Jersey, supermarkets. This announcement today, while relatively minor in the overall scope of Pathmark's operations, does indicate a new direction management is taking. We view it as a positive for the following reasons we discuss.
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AlphaRX Speculative Buy Rating In Update Coverage
Stephen L. Handley
March 14, 2006. AlphaRx (OTCBB: ALRX), based in Ontario Canada, is an early stage pharmaceutical company engaged in developing novel formulations of existing drugs that are insoluble or poorly soluble in water. The Company achieved several significant milestones in 2005, and prospects for the current year, (assuming adequate financing), also encourage us to maintain our Speculative Buy rating and end-of-2006 price target of $0.25 per share. Management's number one product development priority is to fully commercialize a topical version of the nonsteroidal anti-inflammatory drug (NSAID) indomethacin in the United States. This is used specifically to treat osteoarthritis of the knee. A key element in management's strategy is to capitalize on the Company's proprietary bioadhesive colloidal dispersion (BCD) drug delivery systems. In essence, this involves submicron oil-in-water emulsion creams that facilitate a drug's penetration into the skin. In short, we judge that AlphaRx possesses a rather unique and differentiated approach that could ultimately achieve significant commercial potential.
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Bluepoint Energy: Completes $3Million Financing; Raising Price Target - Speculative Buy Reiterated
Richard W. West, CFA
March 14, 2006. BluePoint Energy (OTCBB: CPEU) detailed in a March 14th 8-K the closing of a $3 Million convertible financing that was closed on March 10, 2006. In our last Note on March 2, 2006, we raised our rating of BluePoint to a Speculative Buy, with an initial $1 price target. Since March 2, 2005, the stock has moved up and closed today at a price of $1.05 on volume of 647,000 shares, after trading at an intra-day high of $1.66. Based on this financing and the heavy stock accumulation, we are raising our 12-month price target to $1.50 and we reiterate our Speculative Buy rating.
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Forgent Reports Mixed Results For 2ND Quarter & Six Months; Strong Buy Rating Reiterated
Richard W. West, CFA
March 14, 2006. Forgent (Nasdaq: FORG) management commented in the earnings conference call on March 14, 2006, that in litigation pending against approximately 30 companies for infringement of its U.S. Patent No. 4,698,672 (the '672 Patent), Judge Fogel had indicated that he would have a claim construction ruling on the this patent litigation in 30 to 45 days. The results for the second-quarter were mixed. The good news relates to the Intellectual Property business but the offset to the good news revolves around the NetSimplicity that turned in its first negative revenue quarter in the last eight quarters. Thus far the $108.5 million in '672 settlements, while important on a cash flow basis, are just the preliminary games in the litigation tournament for Forgent. Just as in the NCAA March Madness tournament, the finals down the road are the reasons to invest in Forgent. We reiterate our Strong Buy Rating and $5.00 price target.
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Sky Petroleum Mubarek H-2 Well Nearing 8,500 Ft, 2/3 of Target Depth
Richard R. Wolfe, CFA
March 14, 2006. On March 8, 2006, Sky Petroleum (OTCBB: SKPI) announced that Crescent Petroleum Company International Limited, the operator of the Mubarek Field, reported that as of March 4th the H-2 well, which commenced drilling January 31st, was at a drill depth of 8,396 ft. This is the first of Sky's two obligation wells in the Mubarek Field, the second to be spud in the second half of this year. We have a BUY rating on shares of Sky Petroleum at a 12-month target price of $2.75.
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China Energy Savings Technology: Termination of Research Coverage
Richard W. West, CFA
March 13, 2006. Dutton Associates terminates its coverage of China Energy Savings Technology (Nasdaq: CESV) effective immediately. Seeking additional information from China Energy Savings Technology, Inc., (China Energy) NASDAQ halted trading in China Energy. on February 15, 2006. The price of China Energy stock when halted was $6.82 per share. Nasdaq said that the stock would remain halted until China Energy has fully satisfied its request for additional information. At the time trading was suspended, Dutton Associates had a neutral rating on the shares, and had fulfilled its coverage committments.
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Elron Electronic Industries Ltd: Earnings Preview and Upcoming Conference Call
Barry Raeburn
March 13, 2006. Elron Electronic Industries (Nasdaq: ELRN) will be releasing its fourth quarter and full year 2005 financial results on Wednesday, March 15th, 2006. Elron will also be hosting a conference call that same day at 5:30pm EST. The company will review and discuss recent investment activities and developments in its portfolio companies as well as give an update on general direction for new investments. Elron has been active with two new investments in the first quarter and one sale. We continue to believe that Elron shares present an attractive opportunity as the shares traded a discount to net asset value. The discount to NAV is significant and has fluctuated from a 16% to 25% discount in recent months. We maintain our Strong Buy rating and 12-month price target of $15.
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Top Image Systems: Lowering Rating to Buy from Strong Buy on the Recent Run-up in the Share Price.
Rafael K. Kapelinski
March 13, 2006. We are lowering our rating on Top Image Systems (Nasdaq: TISA) from Strong Buy to Buy following the recent strength in the share price. Over the last few weeks the Company has announced a series of impressive competitive wins, which in our view have bolstered our thesis that the Company is emerging as one of the leading best-of-breed content capture companies. However, given the recent run-up in the share price, we believe that a downgrade is warranted given the richer valuation.
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Xaar: Full 2005 Results Preview, Reiterating Buy Rating and Price Target of $6.20
Rafael K. Kapelinski
March 13, 2006. Xaar (LSE: XAR) will announce full-year 2005 results on Tuesday, March 14. At the beginning of January the Company already announced better-than-expected preliminary 2005 results -- sales came in at £42.8 million (+20.6% year-on-year) and profit before tax at around £11.0 million (25.7% of sales) versus our expectations of £40.74 million and £9.55 million respectively -- and we do not expect any negative surprises during the Company-hosted analyst meeting in London tomorrow. Given the new estimates, the Company's shares are trading at 22.2x 2006E EPS and 4.2x 2006E Sales and P/EBITDA 2006E of 24.8x. We reiterate our Buy rating and price target of USD 6.2 (350p).
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Paulson Capital Files 8-K Detailing Year-End Results Of Wholly Owned Operating Subsidiary Paulson Investment Capital; PIC Reports Loss For Fourth Quarter And Profit For Year 2005; Strong Speculative Buy Reiterated
Richard W. West, CFA
March 12, 2006. Paulson Capital Corp. (Nasdaq: PLCC) filed an 8-K covering the filing of an Annual Audited Report Form X-17A-5 to the Securities and Exchange Commission and National Association of Securities Dealers covering Paulson Investment Company, Inc. (PIC), a subsidiary of Paulson Capital Corp. (the "Company"). The report contains results of operations for the year ended December 31, 2005. For the year-ended 12/31/05 PIC reported revenue increased approximately $6.8 million to $39.7 million and net income increased $4.4 million for the year. While these results are only for Paulson Capital's operating subsidiary PIC, the results do give a direction to the total results for Paulson Capital, Corp. We initially rated Paulson Capital a Strong Speculative Buy at $11.25 on October 21, 2005, with a 12-month price target of $16.25. We reiterate our rating and price target.
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George Foreman Enterprises: Extends Period On Circle Group to March 16, 2006
Gerald F. LaKarnafeaux, CFA
March 09, 2006. Circle Holdings (AMEX: CXN) and George Foreman Enterprises (OTCBB: GFME) announced that the parties had agreed to extend the ninety-day time frame within which a definitive agreement between the parties was to have been executed. The revised date is March 16, 2006.While neither Circle or Foreman offered an explanation for the need for an extension, we do not believe there is a substantive reason for the delay or that the deal will not be consummated on or before March 16, 2006.
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International Barrier Technology: With US Sharehlders More Than 50%, Now Deamed To Be US Not A Foreign Corporation
Gerald F. LaKarnafeaux, CFA
March 09, 2006. International Barrier (OTCBB: IBTGF) has filed a 10QSB that covers the second fiscal quarter for the period ending December 31, 2005. This filing is an important milestone for the Company. Due to number of US shareholders which is now a majority, the Company is no longer deemed to be a foreign Corporation for US reporting purposes. We expect there shortly be a symbol change. We continue to rate International Barrier as a Speculative Buy.
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Lantronix: Rating Raised to Speculative Buy Based On Price
David P. Soetebier, CFA
March 09, 2006. We have raised our rating on Lantronix (Nasdaq: LTRX) to Speculative Buy from Neutral on a price basis. At the recent price of $2.22 the shares have declined to a point where we again consider the price attractive relative to our 12-month target of $2.50.
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LESCO: Reports Inline Fourth Quarter Results and Provides 2006 Guidance; Reiterate Buy Rating
Paul J. Resnik, CFA
March 09, 2006. LESCO (Nasdaq: LSCO) on March 3 reported fourth quarter results substantially in line with our expectations. Net sales increased 3.5% to $128.6 million from $124.2 million in the comparable period a year ago. Full year revenues were $575.7 million for 2005 versus $561.041 million in 2004. Adjusted earnings per share were $0.45 in 2005 versus $0.55 in 2004. We believe that with the benefits of the Company's restructuring likely to become apparent in coming months, it is appropriate to now focus on 2007 projections as a basis for LESCO's share valuation. Accordingly, based on our 2007 EPS estimate, and continuing to assign a 20 price/earnings multiple to the shares, we are revising our 12-month price target from $18.00 to $21.20. Our rating remains Buy.
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21st Century Increases Regular Quarterly Dividend 50%
Richard W. West, CFA
March 08, 2006. 21st Century's (Nasdaq: TCHC) board of directors declared a regular quarterly dividend of $0.12 per common share for the first quarter of 2006. 21st Century's common stock is moving up toward its 52-week high of $19.84. In a Research Note dated March 7, 2006, we raised our rating to a Strong Buy and raised our twelve-month price target to $24.00 per share.
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NutraCea: Plant Expansion
Gerald F. LaKarnafeaux, CFA
March 08, 2006. NutraCea (OTCBB: NTRZ) has entered into a supply agreement with Louisiana Rice Mills, LLC. (LRM) based in Mermenton, Louisiana, a major US rice producing area. . The agreement with LRM is a departure from NutraCea's earlier business model. In addition to the LRM capacity NutraCea is expanding production capacity of its Dillon, Montana plant by 50% to meet rising demand for its core domestic proprietary products. We continue to rate NutraCea stock as a Strong Buy.
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Joystar Rating Raised to Strong Speculative Buy; Home-based Travel Agency Business Model Continues to Mature
Richard W. West, CFA
March 07, 2006. We initiated research coverage on Joystar (OTCBB: JYSR) with a Speculative Buy rating on November 22, 2004, lowered our rating to Neutral on April 8, 2005, and on July 19, 2005, when Joystar announced the closing of an equity offering that raised gross cash proceeds of $1,057,000, we raised to a Speculative Buy. We now increase our rating to a Strong Speculative Buy, and raise our price target to $1.20 per share. The home-based travel agency business model continues to mature as thousands of agency owners close their "bricks and mortars" travel agencies and migrate into the world of virtual travel agencies. Joystar's travel agent network surpassed 3,000 professional agents in early 2006, and is expected to reach its goals of 5,000 agents for year-end 2006. Joystar's software and hardware infrastructure is in place to service upwards of 8,000 to 10,000 part-time and professional home-based travel agents. Joystar Cruises, the Company's "cruise only" channel for agents serving consumers is up and running and agents are booking cruises through this center. Gross travel bookings, the basis for earned commissions, had a 58% increase to $2,153,778 for the quarter ended September 30, 2005, compared with $1,367,477 for the previous quarter ended June 30, 2005. Joystar believes it is on track to produce gross bookings over $100 million by year-end 2006. We are estimating that Joystar will become profitable in 2006, and are estimating income per share of $0.07 for the full 2006.
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21st Century Reports Strong Fy2005 Results; Confirms Guidance For 2006; Raising Rating To Strong Buy - 12-Month Price Target To $24.00
Richard W. West, CFA
March 07, 2006. 21st Century (Nasdaq; TCHC) reported an excellent fourth-quarter ended 12/31/05, with total revenue increasing 21.8% to $25.1 million from $20.6 million for the fourth-quarter ended 12/31/04. Net income for the fourth-quarter FY2005 was $1,418,991. On a diluted basis, EPS was $0.21 per share, based on 6,872,879 average diluted shares outstanding, compared with a loss of $(0.08) EPS on 6,268,876 average diluted shares outstanding for the fourth-quarter FY2004. These results are most positive considering that three hurricanes, Dennis, Katrina, and Wilma, struck Florida in 2005. Management reviewed its guidance for Q1 and 2006, on which we comment. At the current price level, 21st Century's common stock is selling at a 4.3 P/E ratio based on management's guidance of $4.00 basic EPS, a 2.8 price to book ratio, and price to sales ratio of less that 1.0X. We are preparing an Research Report with updated income model. We are raising our rating to STRONG BUY and raising our 12-month price target to $24.00 per share.
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NutraCea: Adds Two Key Executives; Reiterate Strong Buy
Gerald F. LaKarnafeaux, CFA
March 07, 2006. NutraCea (OTCBB: NTRZ) has expanded its management team with the hiring of two key people. Dr Rani Patel joins the Company as Chief Science Officer. Mr Kody Newland has been appointed Senior Vice President of Sales. We continue to rate NutraCea as a Strong Buy.
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Trinity Biotech plc - Reported 2005 Results on Target; Reiterate Strong Buy Rating and $12 Price Target
Stephen L. Handley
March 07, 2006. Trinity Biotech (Nasdaq: TRIB) results for 2005, reported yesterday, were closely in line with our estimates contained in our report of December 19, 2005. In particular, 2005 revenues rose 23.2%, to $98.56 million (our estimate was $97.5), while earnings per ADR were $0.36 (in line with our estimate). One of the highlights of the year was the steady improvement in operating margins. During the quarterly conference call, management disclosed that this Friday it will appear before the FDA's Blood Products Advisory Committee to present its case for permitting the sale of its Uni-Gold™ HIV test to the over-the -counter market. We continue to rate the stock a Strong Buy, with a year-end price target of $12 per share.
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Visiphor: Announced a New Briyante Contract. Reiterate Speculative Strong Buy rating and Price Target of $0.50
Rafael K. Kapelinski
March 07, 2006. According to today's release, Visiphor (OTCBB: VISRF) will supply its core data integration software platform -- the Briyante Integration Environment ("BIE") -- as part of a law enforcement and justice integration project in the United States. We are still expecting the Company to announce a BIE contract in another vertical market such as health care industry, for example. In our view, a few contracts outside of law enforcement would prove the Company's case that the recent acquisition of Synaptic should allow Visiphor to significantly expand the addressable market opportunity. The current valuation (P/Sales 2006E of 1.0x) understates Visiphor's improved positioning and stronger financial position following the acquisition of Synaptic Solutions.
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Top Image Systems Strong Buy Rating In Update Coverage; Raising Target Price to $5; One of Leading Companies in Content Capture Market
Rafael K. Kapelinski
March 06, 2006. Top Image Systems (Nasdaq: TISA) has announced a set of strong 4Q 2005 results. Revenues came in at US $4.71 million (+14.6% over the previous month) and EPS reached US $0.02 versus our estimate of U.S. $0.00. Given the current valuation (1.4x 2006E sales and 8.6x 2006E EBITDA), we believe that we should see additional strength in the share price over the coming weeks. The Company's 2005 revenues (+50.5% year-on-year) compare favorably with those of ReadSoft's (+12%) and OpenText's (+13%), which remain the primary competitors. Also, the Company is on track to generate the target EBITDA 2006E margin of approximately 14%. In our view, the results are yet another piece of evidence that the Company is beginning to emerge as one of the leading players in the content capture market. We also continue to believe that the Company's positioning as a pure-play content capture manufacturer with solution providing capability makes it an attractive acquisition candidate in the ongoing consolidation of the content capture market. We reiterate our Strong Buy rating and upgrade our price target to $5.00 per share.
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ImageWare: 4Q 2005 Results Preview; Reiterate Buy Rating and Price Target of $3.25
Rafael K. Kapelinski
March 06, 2006. ImageWare (AMEX: IW) will announce 4Q 2005 results on March 23. We anticipate revenues of $2.02 million and EPS of $(0.15). All in all, we expect a good set of numbers. The single most important question surrounding the stock now is as to what extent the Company can accelerate sales growth and capitalize on the significant operating leverage in 2006E. We believe that the Company is picking up sales momentum and we are confident about our 2006E forecast. In fact, last week we have upgraded our 2006E sales and profitability forecast: we now expect 2006E revenue and EPS estimates of $10.03 million (+7.7% year-on-year) and $(0.43) respectively. We discuss its valuation and what to look for in the earnings release.
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National Coal: Completes Purchase Of Devonia Rail Spur From Norfolk-Southern
Richard R. Wolfe, CFA
March 04, 2006. On February 28, 2006, National Coal Corp. (Nasdaq: NCC) completed the $1.96-million purchase of Norfolk-Southern's 42-mile Devonia-to-Oneida rail spur serving NCC's 65,000-acre New River Tract west of Knoxville, Tennessee. The purchase opens up the New River Tract to profitable mining activity, saving $4-6 per ton in operating costs. To realize the savings, NCC will carry out a $3 million coal preparation plant renovation, including $2 million to restore the condition of the rail line. The total capital cost associated with the rail purchase should come to approximately $7 million. The improvements are scheduled for completion during the third quarter of 2006, at which time NCC has plans to begin opening four permitted New River Tract mines. The New River Tract is in a superior competitive position for rail shipments of coal destined for utilities throughout the southeastern United States.
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PHARMOS Strong Speculative Buy Rating In Updated Coverage; Clinical Progress On Cannabinor Meeting Our Timeline Expectations
William R. Prather, RPh, MD
March 03, 2006. Pharmos Corporation's (Nasdaq: PARS) clinical progress on cannabinor, their CB2-selective synthetic cannabinoid product, is meeting our timeline expectations. We believe the Company's work with cannabinor and other CB2-selective cannabinoids could lead to successful therapeutic products. Add to this the fact that the Company's common stock is currently trading for less than its cash per share value, with approximately $48 million in cash and a burn rate that we believe will average approximately $12.5 million annually over the next few years. We, therefore, continue to rate the common stock of Pharmos a Strong Speculative Buy with a 12-month price target of $3.75.
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Ampex Strong Buy Rating Maintained In Update; Significant Progress Since Our Initiation of Coverage
Richard W. West, CFA
March 02, 2006. We initiated coverage of Ampex Corporation (Nasdaq: AMPX) in a research note on December 2, 2004. After registering an intra-day high of $56.75 on January 24, 2005, Ampex's common stock sold down recently to register a new 52-week low of $18.19 on January 26, 2006. Ampex has made significant progress in signing up additional licensees and paying down debt since we began our research coverage. Due to our long-term outlook for Ampex, based on the potential royalties from licensing its patents for digital still cameras, digital cam recorders, digital versatile disk recorders, and digital camera phones, we have maintained a Strong Buy rating during the downtrend in the stock price. We reiterate the Strong Buy rating and discuss the outlook for Ampex in our report.
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Smart & Final Buy Rating Maintained In Update Coverage; Positives Playing Out
Jonathan H. Ziegler, CFA
March 02, 2006. The Smart & Final (NYSE: SMF) Q4 EPS represented by far the largest percentage discrepancy from our estimate in this analyst's many years of experience. We had estimated $0.09 per share. However, when breaking out the contributions to fourth quarter EPS, it becomes clear that most of the difference was not due to spectacular sales, but rather accounting adjustments and other factors that make the difference less significant. The adjusted reported EPS would be $0.15, not quite double our estimate. Smart & Final is in a transition mode from that of limited unit growth to a more aggressive growth program. 2005 -- more precisely, the fourth quarter of 2005 -- saw the first manifestation of this new, more aggressive capex program. It has a number of ramifications, both good and not-so-good. Among the former is the potential to build market awareness and market share in existing markets and to drive sales growth as the new cohort of stores matures. The not-so-good impact is that the relatively large base of new stores hinders store sales productivity and margin percentages over the near term, while they are still immature. However, the Company generates abundant cash flow to finance this program internally. However, we see some positives playing out down the line, including the contribution to both compass and margin of the maturing new store base; the potential for more "green" (Smart Foodservice Cash & Carry) stores in southern California and more "red" (traditional Smart & Final) stores in northern California and the Pacific Northwest.
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Bluepoint Energy, Inc., Completes Contract With Major Resort Company; Increasing Rating To Speculative Buy
Richard W. West, CFA
March 02, 2006. BluePoint Energy, Inc. (OTCBB: CPEU), announced an initial Discount Energy Agreement with an operating company of Starwood Vacation Ownership, Inc. (Starwood), a wholly owned subsidiary of Starwood Hotels & Resorts Worldwide, Inc. (NYSE:HOT- $64.40). The agreement with Starwood will operate under BluePoint's proprietary Discount Energy Purchase Agreement in association with BluePoint Energy Partners, thereby saving Starwood significant energy costs on an annual basis. These initial projects, will be installed at Kaanapali Ocean Resort Villas North and South, and could produce approximately $1.9 million in revenue to BluePoint Energy, Inc. in calendar 2006. We are increasing our Rating from Neutral to Speculative Buy based on several factors discussed.
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Clearant: Tristar Bioventure License Terminated Although Talks Continue;
Sally H. Wallick, CFA
March 02, 2006. Effective February 23, Clearant's (OTCBB: CLRI) license agreement with Tristar Bioventures automatically terminated because Tristar failed to make two payments totaling $1.5 million required under the terms of the agreement. Clearant had extended the license twice while the companies discussed how to resolve this matter, and even now the discussions are continuing. Since late September 2005, Clearant has successfully expanded its business with tissue suppliers, announcing agreements with three new customers and an expansion of its business with another one. We reiterate our Speculative Buy rating on Clearant's shares.
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DXP Enterprises Reports Outstanding Fourth Quarter Results; EPS Estimate and Price Target Raised; Strong Buy Reiterated
Paul J. Resnik, CFA
March 02, 2006. DXP Enterprises, Inc. (Nasdaq: DXPE) today announced outstanding fourth quarter and full year 2005 results. Although we had indicated in our Research Note dated February 15 that "we continue to look for particularly strong demand from oil industry clients and believe this, combined with the benefits of recent and potential future acquisitions, may enable the Company to exceed our earnings per share estimates of $0.82 for 2005 and $1.24 for 2006," we were nonetheless surprised by the extent of the strength. The Company reported net income of $2.1 million for the fourth quarter, with diluted EPS of $.36 compared to net income of $0.6 million and diluted EPS of $.12 for the fourth. We are raising our revenue estimate for 2006 from $231.3 million to $244.9 million and our EPS estimate from $1.24 to $1.45. Based on the continued assumption that the stock can trade at a 20 price/earnings multiple, we are raising our price target from $24.80 to $29.00. We will generate a preliminary estimate for 2007 within the next month and commence to use that figure as a basis for valuation at that time. We would again note that the Company continues to have a policy of seeking accretive acquisitions and we have made no allowance for any such acquisition in 2006. quarter of 2004 and our estimates of $1.4 million and $0.23.
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Forgent: Earnings Release And Conference Call; Markman Hearing For '672 Patent Lawsuit Scheduled For March 9, 2006
Richard W. West, CFA
March 02, 2006. Forgent(tm) (Nasdaq: FORG) announced that it will release the results of its 2006 fiscal second-quarter for the period ending January 31, 2006, on Tuesday March 14, 2006, at 8 a.m. CT (9 a.m. ET). Forgent has scheduled a conference call on the same day at 10:00 a.m. CT (11:00 a.m. ET) to discuss the quarter and the future outlook. The setting of the date for the Markman Hearing could help stabilize the market price of Forgent. We reiterate our Strong Buy Rating for Forgent, and reaffirm our 12-month price target of $5.00 per share.
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EasyLink Systems: Reports Fourth Quarter Earnings and Provides 2006 Guidance; Our Rating Remains Neutral
Paul J. Resnik, CFA
March 01, 2006. EasyLink Services Corp. (Nasdaq: EASY) reported fourth quarter results on February 28, 2006 with full year 2006 revenues in at $78,659,000 and net results, not including separation agreement costs of $2.31 million and the loss on the sale of fax businesses of $0.25 million, of a profit of $0.03 per share (a loss of $0.03 per share including those charges). We continue to maintain a Neutral rating on the stock pending, in coming days, the resolution of its near-term funding needs, and, in coming months, greater visibility for growth, particularly in Transaction Management revenues.
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Paulson Capital: To Split Stock Two-For-One; Strong Speculative Buy Reiterated
Richard W. West, CFA
March 01, 2006. Paulson Capital (Nasdaq: PLCC) announced that its Board of Directors approved a two-for-one stock split of its common stock, to be effected in the form of a stock dividend. The decision to split the stock came about to produce more trading liquidity in the common stock, broaden ownership, and enhance shareholder value. We initially rated Paulson Capital a Strong Speculative Buy at $11.25 on October 21, 2005, with a 12 month price target of $16.25. We reiterate our rating and price target.
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Wave Systems Strong Speculative Buy Rating Reiterated In Update Coverage; Leading Provider of "Trusted Computing" Solutions
David P. Soetebier, CFA
February 28, 2006. Wave Systems (Nasdaq: WAVX) is a leading provider of "trusted computing" solutions. "Trusted" computers use a combination of hardware and software to reduce or eliminate the possibility of the software installed on a personal computer being corrupted, and to verify that the user on a PC is the designated user of the machine. Because the rate of adoption of this technology is unknown, we believe it is difficult to develop an accurate earnings forecast. However, in 2005, the Company made significant progress in releasing new products and in solidifying relations with key OEMs such as Dell, Intel and Seagate that should drive sales. By the end of the September 2005 quarter, 3.49 million of Wave's trusted platform modules (TPMs) had been shipped. Consequently, for those investors willing to consider an investment that offers the potential for significant appreciation, keeping in mind the risk that the Company is effectively out of business if its products are not widely adopted, we believe Wave offers strong speculative appeal. Consequently, we rate the shares a Strong Speculative Buy with a 12-month target price of $2.00.
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ImageWare: Adjusting Estimates Upwards, Reiterate Buy Rating and Price Target of $3.25
Rafael K. Kapelinski
February 28, 2006. We upgrade our 2006E ImageWare (AMEX: IW) revenue and EPS estimates from $9.37 million and $(0.54) to $10.03 million (+7.7% year-on-year) and $(0.43) respectively. The single most important question surrounding the stock now is as to what extent the Company can accelerate sales growth and capitalize on the significant operating leverage in 2006E. The recently announced ID security contracts indicate that the Company has been picking up some sales momentum, which has spurred our upgrade. We reiterate our Buy rating and a price target of $3.25.
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Telkonet Announces MST Agreement With Dish Network; Speculative Buy Rating Reiterated
Richard W. West, CFA
February 28, 2006. Telkonet (AMEX: TKO) announced on February 27, 2006, that its subsidiary, Microwave Satellite Technologies (MST), signed an agreement with EchoStar Communications Corporation (Nasdaq:DISH-$29.52) and its DISH Network™. Under the agreement, MST will offer EchoStar's all-digital DISH satellite TV service under MST's NuVision trademark to MST subscribers in New York's Trump Place complex of seven condominiums on the West Side of Manhattan. We view this agreement as a major positive for Telkonet and MST in their marketing effort in the New York City area. The revenue results will be watched carefully as MST adds customers for its "quadruple play" service. This announcement of the agreement with EchoStar should allay fears that Telkonet's business could suffer due to the temporary absence of Mr. Pickett. We reiterate our Speculative Buy Rating and the $6.25 price target.
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Xaar: Company Update, Reiterating Buy Rating and Price Target of USD 6.2.
Rafael K. Kapelinski
February 28, 2006. We reiterate our Buy rating and price target of USD 6.20 (or 350p) on Xaar (LSE: XAR). We recently upgraded the stock following the Company's announcement of the very strong preliminary 2H 2005 results and will be adjusting our estimates following the release of the full 2H 2005 results on March 14. In the meantime, we believe the Company continues to sustain a strong sales momentum and is on track to meet our 2006E expectations. Also, based on our industry sources (who are OEMs sourcing printheads for their proprietary systems), we believe that the superwide format market remains healthy although pricing pressure continues unabated. Point-of-sales and out-of-home advertising remain the market's primary revenue drivers.
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Internet Gold-Golden Lines Ltd. Reports Strong Fourth Quarter: Buy Rating and $8.00 Price Target Reiterated
Rafael K. Kapelinski
February 27, 2006. February 27, 2006. We view Internet Gold-Golden Lines Ltd.'s (NASDAQ: IGLD We view Internet Gold's fourth quarter results as strong. The top line came in at $17.6 million (+10.4% sequentially) versus our estimates of $17.4 million. EPS came in lower than expected, at $0.06 per share versus our expectations of $0.08, as a function of a higher-than-expected financial charge. We expect the share price to strengthen over the coming weeks, especially as the Company, according to the management, has had a very strong start to 1Q 2006. We reiterate our Buy rating and 12-month price target of $8.00 for these shares. Internet Gold is a leading Internet services provider in Israel. The Company operates one of the most popular Israeli portals, MSN Israel, and generates e-commerce and e-advertising revenues through a number of subsidiaries.
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Pacific Ethanol Price Target Adjusted Up from $18.00 to $18.40 Based on Commodity Price Trends; Rating Revised Down from Speculative Buy to Neutral Based on Sharp Stock Price Advance
Paul J. Resnik, CFA
February 27, 2006. When we initiated our coverage of Pacific Ethanol (NASDAQ: PEIX) on December 2, 2005 with a rating of Strong Speculative Buy and a 12-month price target of $15.80, the stock was trading at $10.57. On January 31, 2006, with the stock trading at about $16.00, we raised our price target to $18.00 but lowered our rating to Speculative Buy to reflect the price advance in the shares. The next day, with the stock displaying a great deal of volatility, we made the following comment: "We have decided that rather than adjusting our rating on the increasingly volatile Pacific Ethanol shares on a daily basis, we will maintain our Speculative Buy rating to reflect our positive view of this Company's long-term potential." Today, we are again raising our price target, albeit modestly, to $18.40, and again revising our rating, this time to Neutral, to reflect the continued strength in the stock (trading at $19.80 as of this writing).
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