ZerO's kleine Spam Stock Ecke

As I write this edition, the stock has already traded over 4 million shares and broken through $.09. I still believe over the longer term the stock could find its way back to the $.25 level if product sales accelerate.

Conclusion- if you missed the first 100% move in this stock from $.07 to $.15, you might have another shot. Click Here to read the full text of the press release.
  VirTra Systems (OTC BB: VTSI) Rolls Out Fixed 360° Version of Training Simulator  




Just prior to the close today, VirTra Systems, my latest idea in the microcap arena, announced that their new "Judgemental Use Of Force" 360° simulator has now been introduced and is ready for sale.  

This event represents the entry into a new and burgeoning market for VirTra Systems. The company already has a foothold in the promotional market through contracts with Pennzoil, Red Baron, Buick, and Pepsi. Homeland Security and military applications represent a new market for VirTra Systems, which has me very excited about the prospects for this company.

No other simulator on the market today matches VirTra Systems for creating a full, 360° high stress training experience. This product uses multi array projection instead of a head set. The trainee uses the actual weapon he or she would use in a real life situation, not a plastic video game type appliance.  

The Homeland Security budget has expanded to $37.7 billion. Earlier today, lower Manhattan was shut down as a City Councilman was reported to have been shot at City Hall. These types of events tend to fuel demand for trained security officers, and Virtra Systems has products to fill the demand. Typically, governmental budgets are planned in the summer and fall, and contracts are awarded in the September to December time frame for the coming fiscal year.



I believe there is plenty of upside from the ridiculously low level at which this stock trades. Based on today's levels, the market is only valuing the company at about $4 million. This stock has also pulled back into the middle of its trading range, offering an ideal, lower risk entry level.

If this company begins announcing sales of the simulators to any kind of security agency, be it military or non-military, I suspect the stock will grow legs and run up the charts. The trick is to own it before it happens.  

The surge you see in July was on heavy volume. The ensuing pullback has been on light volume, suggesting it could turn back up quite easily. I don't believe this stock will hang around in the $.10 area for long, especially if contracts start rolling in.
 
 

Celgene will be able to provide stem cell transplant units sourced by Anthrogenesis as a therapeutic offering to oncologists treating hematological cancers.  The company will also become a leader in the business of private stem cell banking -- collecting, processing and storing stem cells retrieved at the time of birth from the placenta and umbilical cord blood, for family use.  Anthrogenesis is a licensed blood bank and a FDA-registered cell therapy company.

Geron Corporation (GERN) is a biopharmaceutical company focused on developing and commercializing therapeutic and diagnostic products for applications in oncology and regenerative medicine, as well as research tools for drug discovery. The company's product development programs are based on three patented core technologies:

Telomerase is an enzyme that, when introduced into normal cells, is capable of restoring telomere length (the end of a chromosome), consequently increasing the life span of cells without altering their normal function or causing them to become cancerous.
Human embryonic stem cells enable the development of transplantation therapies by providing standard starting material for the manufacture of cells and tissues.
Nuclear transfer is used for the creation of cloned animals.  Geron owns the technology that created Dolly the cloned sheep back in 1997.
This is the most controversial stem cell research company in the U.S. because of its support for embryonic stem cell research.  Recently Geron received a lot of attention when the company's stem cell therapy for spinal cord injury was highlighted in several sources including newscientist.com and independent.co.uk.  The articles focused on the results of oligodendreocytes, derived from human embryonic stems cells, which were transplanted into paralyzed rats.  After 38 days, control mice remained paralyzed, where as treated mice were able to walk.

Pluristem Life Systems (PLRS) was founded after five years of cooperative research and development between Dr. Shai Meretzki, the Technion Israel Institute of Technology and the Weizmann Institute of Science.  The company has developed a bioreactor, called PluriX, which will bring about the expansion of cord blood to proportions that will be enough for several adult transplants. The company hopes to provide cell expansion services to transplant centers and cord blood banks in the US and Europe.

The SmallCap MarketWatch issued a trading alert on Pluristem last week.  Shares of the company closed at $1.85 per share up from $1.60 for a gain of 15.625%.  Shares have since drifted down to close at $1.68 per share yesterday.  Long term investors have a chance to own shares at a discount to the $1.80 per share private placement that was completed in June.
 

StemCells, Inc. (STEM) is engaged in research aimed at the development of therapies that would use stem and progenitor cells to treat, and possibly cure, human diseases and injuries such as Parkinson's disease, hepatitis, diabetes, spinal cord injuries, stroke and some metabolic genetic disorders.  Progenitor cells are cells that have already developed from the stem cells, but can still produce one or more types of mature cells within an organ.

Dr. Irv Weissman, founder and director of the company is a professor of Cancer Biology, Pathology and Developmental Biology at Stanford University. His Stanford lab was the first to isolate in pure form any stem cell from any tissue in any species. This is why some consider him to be the father of stem cells.

StemCells, Inc is focused on three specific areas of research:

Neural cell program is investigating therapies to treat a variety of disorders such as Parkinson's disease, Huntington's disease, Alzheimer's disease, Epilepsy, ALS, Spinal Cord Injury and Multiple Sclerosis. The company has isolated human neural stem cells from brain tissue and has shown that these stem cells survive after implantation into animals, differentiating into cell types characteristic of the sites within the brain into which they are transplanted, including neurons.
Liver stem cell program seeks to repopulate and repair liver that has been damaged or destroyed as a result of disease or injury. The program is focused on the identification of stem cells that can restore liver function.
Pancreatic cell program is directed at isolating and characterizing pancreatic islet stem cells, which may be useful for treating Type I or juvenile-onset diabetes. Scientists at StemCells, Inc. are currently transplanting cells that express markers thought to be on pancreatic stem cells into diabetic mice to see whether this will alleviate their symptoms.

ThermoGenesis (KOOL) designs and manufactures medical devices and sterile single use disposables.

The company is best known for its BioArchive System which features a proprietary robotic, cryogenic device that automatically freezes, archives and manages an inventory of up to 3,626 individual 25 ml samples of cord blood. The system controls and records the freezing profile of each unit in nitrogen vapor, after which the unit is robotically transferred to a specified indexed location in liquid nitrogen. The BioArchive System tracks the storage address of each unit and assures that only the specified unit is retrieved when selected by the operator without exposing the other archived samples to detrimental transient warming events.

The National Institute of Health (NIH), through the National Heart, Lung & Blood Institute (NHLBI), sponsored a $30 million program to advance cord blood stem cell banking in the U.S. and has chosen to exclusively utilize the three BioArchive disposable bag sets. Two of the three NHLBI Cord Blood Banks, Duke University and Georgetown University, have already acquired the BioArchive.  The company has sold 48 BioArchive systems in 21 countries giving the company a strong customer base.

On June 12, 2003 ThermoGenesis scientific advisory board members presented clinical data on the use of cryopreserved cord blood stem cells in the treatment of lethal diseases at Senate Hearing. The Washington lobbying efforts may prove to be a tremendous break through for the company if legislation for the National Cord Blood Bank is approved.

By early next year 100 Boeing jet aircraft are expected to morph into flying cyber cafés. For a $25 fee, passengers will be able to enjoy high speed wireless internet access during their flight. Boeing intends to retrofit 4,000 jets by the end of the decade.

"Hot Spots" are popping up at locations nationwide. T-Mobile has already installed "Hot-Spots" at thousands of Starbucks locations nationwide. Verizon is charging into the fray by converting payphones in busy metro areas into "Hot-Spots".

Pronto is probably the biggest name in the Wi-Fi game today. Boingo, which provides Hot-Spots in Hilton Hotels and several of the larger airports around the country is not far behind.

However, Wi-Fi is not limited to busy metro areas. Because of the low infrastructure costs, Wi-Fi is ideal for rural environments. Small Wi-Fi ISPs, known as WISPS (Wireless Internet Service Providers) are popping up all over the mid west.

It is estimated that 80% of people in rural areas are now using the internet. Only about 22% have access to broadband, as neither cable or dsl has come to their homes. Rural wireless operator Midwest Wireless, a Minnesota based regional cellular carrier, has been installing Alvarion fixed wireless equipment for the past 18 months. The system now has 60 sites and about 1,500 broadband subscribers.
  Big Boys Jump Into the Fray  




Big boys with big bucks have been gearing up for the Wi-Fi revolution for several years. Examples include:

Intel is spending $300 million to market its Centrino computer chips, which come equipped for Wi-Fi.
Cisco Systems agreed to spend $500 million for Linksys, a Wi-Fi equipment maker. That will put Cisco into head-to-head competition with
Microsoft Corp. Microsoft is pushing XP, the new version of Windows with Wi-Fi features built in.
Cometa Networks, the new joint venture made up of Intel, IBM, and AT&T, is building a nationwide network of 20,000 hot spots over the next three years.
Verizon is building hot spots all over the country, converting phone booths into hot spots.
T-Mobile USA, already anchored in Starbucks, is following suit.
Is it any wonder the titans of technology are jumping into the Wi-Fi revolution? The bar graph I have provided shows estimates for the growth of wireless demand through 2004. Wireless users are expected to grow worldwide from 80 million in 2003 to 150 million in 2004. The North American market is the laggard, and just beginning to gather steam. Wireless use is far ahead of us in Europe.
  The Good News  

For the latest on the Wi-Fi revolution, the best resource on the Internet is www.80211-planet.com/.

I have identified a totally undiscovered Wi-Fi idea which no one knows about, and I mean no one. I'm not sure about the timing of the first release, but I hope to kick off the idea in next weekend's edition. This is a true ground floor opportunity in the hottest segment of the market. Right now, I have to run out to my local Fry's and check out the latest Sony Notebook computers equipped with the Centrino chip. I want Wi-Fi too. In the meantime, we you aware that:
  Family Room (OTC BB: FMLY) Producing Film Starring John Travolta  


Family Room snuck out a news release under everyone's nose Friday morning. It seems they are now filming "Love Song for Bobby Long", starring John Travolta and Scarlett Johansson. I spoke with management about the John Travolta movie. Family Room has chosen not to make a big deal out of the film, as they don't have a piece of the producer profits, and the film therefore has no chance to impact the bottom line.

They will collect some small producer fees and get the prestige associated with being executive producers on the film.

In the same press release it was also announced that Family Room has identified Hollywood artist Crash McCreery to create "The Abominable Snowman." This movie will be coproduced along with  Ilya Salkind ("Superman" I, II and III) and Vallhalla Motion Picture's Gale Anne Hurd ("The Hulk").

This project has the potential to be a huge money maker for shareholders of Family Room. Look for news of a big budget with a big studio and a percentage of the gross to send this stock charging up the charts. I still believe Family Room has a shot at $.25 in the short term (60 days).

The baskets are useful because readers that take the time to dig deeper into some of the companies will find real gems and may consider taking heavier positions on individual companies.  Those that may have less time to do research and choose the easier path of owning the entire basket have also fared very well.  The more time you spend on due diligence is directly correlated to how well you do in the markets (this is as long as you know what you are doing).  We decided to take a look at how these baskets have performed and the numbers were in our favor.  Seven out of twenty six companies were losers with an average loss of 4.26%.  However, the remaining nineteen companies saw an average gain of 61.54%.  Now do we have your attention?

Despite mentioning multiple companies in some of our early editions we didn't make official baskets until our April 17 edition.  The interesting title, Telecom: The Four Letter Word, focused on six telecom equipment penny stocks that were trading below their cash levels.  The bad news is that most of these companies are no longer great values.  However, the good news is that readers who shared our optimism on this sector back in April have reaped significant gains.  The total return for the basket is 69.30% based on Friday's closing prices.  This is a quite a performance in just three and a half months.


Based On Closing Prices Of 7/25/03

In our May 9th edition, Renaissance Of The Bubble Companies, we presented eight companies that really stood out among the hundreds that we follow.  These were former high fliers that boasted huge market capitalizations and were the darlings of Wall Street.  As the bubble deflated these companies' stock prices along with investor interest headed towards oblivion.  Somewhere along the way the companies began to turn themselves around and improved their fundamentals.  The brave readers that took the plunge into the "Bubble Companies" saw gain of 75.44% in less than three months.


Based On Closing Prices Of 7/25/03

What drove us to write The Big View On Nanotechnology was due to the overwhelming response we received when we asked readers what the next hot sector would be.   Hundreds of emails came into our in boxes with links to articles and companies that were doing big things with "small" technology.  The challenge was top find stocks that still had appreciation potential because most had already run up.  The nanotech basket was introduced on June 17 and in that time the total return has been a respectable 16.05%.  This is the perfect example of how diversification can be both a positive and a negative.  Owning the entire basket proved to be rewarding but having a large position in only Flamel Tech (FLML) would have produced an 85.56% return.


Based On Closing Prices Of 7/25/03

Our most recent sector focus has been stem cell research.  We dedicated an extraordinary amount of time on this topic because of the inevitable bills that would introduce a National Cord Blood Stem Cell Bank.  The SmallCap MarketWatch released our edition on the Stem Cell Research Basket July 23rd and as luck would have it two days later the bill was announced.   The momentum should continue this week when the Senate is expected to introduce a similar bill and also because Christopher Reeve will be visiting Israel to further his campaign for stem cell research.  These developments should draw attention to the companies in our stem cell research basket.


Based On Closing Prices Of 7/25/03





Conclusion

We presented twenty six companies in the four baskets and only seven (27%) saw losses while nineteen (73%) had gains.  Nine out of the nineteen gained over 50%, fourteen gained over 20%, and all of them gained over 5%.  Out of the seven losing stocks only one had lost more than 10% while the average percentage loss was 4.26%.  Meanwhile the average gain for stock's that went up was an outstanding 61.54%. What does all this mean?  If you haven't figured it out yet then chances are the SmallCap MarketWatch is not for you.

Today, we are issuing a trading alert on Refocus Group, Inc. (RFCG) a medical device company specialized in researching and developing surgical treatments for presbyopia as well as other eye disorders.  Shares of Refocus closed today at $1.50 per share. This is a 25% discount to the $5.75 million private placement that institutional investors paid in March.  We are placing a target of $2.00 per share representing a potential gain of 33% gain from today's closing price.

When we first read about this company our initial thought was the number of biotechs working on breakthrough treatments are everywhere.  What makes this company different?  The answer is CIBA Vision, whose parent company is Novartis (NVS).  It's not everyday you find a small company with a partner that did $20 billion in revenue in 2002.

Novartis paid $2.00 per share like the other institutional investors in the most recent private placement.  This small cap must be on to something or else a multinational conglomerate of this size would not give Refocus the time of day.  Readers have an opportunity to own shares of Refocus at prices far better than what Novartis.  This window of opportunity may not last as word of this technology reaches the masses.  In January Business Week featured the technology in an article titled "Put Those Glasses Away For Good".

Refocus hopes to begin Food and Drug Administration (FDA) Phase II clinical trials by the end of 2003.  In addition a European commercial launch could occur in the latter part of this year.  Today's announcement that Refocus Group's New Automated PresVIEW Scleral Incision System Receives European CE Mark Approval means that company is closer to reaching the two goals mentioned above.

Blockbuster Partner

In summer of 2001, CIBA Vision, began an extensive period of due diligence on Refocus Group's PresVIEW technology and concluded that the PresVIEW Implant and related PresVIEW System represented significant market potential.

Refocus Group entered into an agreement with CIBA Vision in March 2002, pursuant to which CIBA Vision has the right to obtain an exclusive worldwide license to market, distribute, and sell Refocus Group's PresVIEW SSP technology for presbyopia, ocular hypertension (OHT), and primary open angle glaucoma.  Under this agreement, CIBA Vision will market Refocus Group products under the PresVIEW trademark.

Terms of the agreement with CIBA Vision call for Refocus Group to receive a percentage royalty on CIBA Vision's worldwide net sales of the PresVIEW System and related products. CIBA Vision also has agreed to assume responsibility for the legal defense of Refocus Group's worldwide PresVIEW patent portfolio against patent infringement, subject to mutual agreement.

CIBA Vision's strategy for Refocus is as follows:

Build awareness credibility among leading opinion medical doctors on the totally re-engineered procedure and product.
In Europe, where it currently has a CE Mark, CIBA Vision has announced its intent to establish seeding Centers of Excellence (COEs) in several countries by the end of 2003.
In Canada, CIBA continues to seek regulatory approval and also establish several seeding clinical or commercial COEs by the end of 2003, subject to Health Canada approval.
In the U.S. the next step is to begin Phase II FDA clinical trials, which the Company expects will occur later in 2003, subject to FDA approval.
CIBA Vision's parent company, Novartis AG, is a world leader in pharmaceuticals and consumer health. In 2002, the Group's businesses achieved sales of $20.9 billion and a net income of $4.7 billion. Novartis Group employs approximately 72,900 people and operates in over 140 countries around the world.
Procedure

Refocus Groups newly evolved PresVIEW SSP is an incision based procedure that employs four separate plastic segments, each about the size of a small grain of rice, made from polymethyl methacrylate (PMMA). PMMA has been implanted safely in or on the eye for unrelated surgical procedures or devices, such as hard contact lenses, for more than 50 years. The PresVIEW SSP is a relatively painless procedure, which takes less than one hour (approximately 15 to 30 minutes per eye). The procedure requires local anesthesia and is believed to produce virtually no side effects, with the exception of redness around the eye, which lasts from two to four weeks.

The PresVIEW System employs a mechanical blade to make four superficial and uniform incisions in the quadrants of the sclera (the tough white outer coat of the eyeball). Ultrasound mapping is used to identify the precise location for each incision prior to actual surgery. The PresVIEW PSI is then inserted into the superficial pockets or tunnels, causing a lift in the sclera that in turn reduces the crowding of the underlying muscles surrounding the crystalline lens.

Some effects of Scleral Spacing Procedure (SSP) are instantaneous. Immediately following the surgery, many patients are able to read the fine print in newspapers and phone books in the operating room. For other patients, some follow-up exercises may be beneficial in helping strengthen the ciliary muscles that may have weakened do to lack of use in recent years.

Refocus Group has already conducted Phase I feasibility clinical trials at the Barnes-Jewish Hospital at the Washington University School of Medicine in St. Louis, the Dean A. McGee Eye Institute at the University of Oklahoma in Oklahoma City, the New York Eye and Ear Infirmary in New York City, the Jules Stein Eye Institute at UCLA in Los Angeles, the Stanford University School of Medicine in Palo Alto, and the Storm Eye Institute at the Medical University of South Carolina in Charleston.

Consolidation In The Eye Care Industry

While we were conducting due diligence on Refocus we learned how incestuous the eye care industry has become.  The current President and Chief Executive Officer of Refocus Group is Terry Walts.  Previously Mr. Walts was a Senior Vice President of Sales and Marketing for CIBA Vision.  After leaving CIBA, Walts became a Director and Chief Marketing Officer for Autonomous Technologies, a refractive laser surgery startup until 1998.  Autonomous previously traded on the Nasdaq under the ticker symbol ATCI.  ATCI subsequently was bought out by Summit Technology who at the time also traded on the Nasdaq under the ticker BEAM.   At the time of the merger CIBA owned 15% of Autonomous.  To make things even more interesting Summit was bought out by Alcon Laboratories.

Does the future hold the same path for Refocus like many of its peers?  If the company continues to prove that its PresVIEW SSP is indeed effective in correcting presbyopia then it won't matter if acquisition is the end result.  Refocus is relatively unknown in the investment community but with a partner like Novartis it will be hard for the company not to get attention.
 
 

Buy up to $1.60 per share, This is a significant discount to what institutional investors such as Novartis paid for shares of Refocus.  Make sure to use limit orders.   If the stock gaps up do not chase it.  Wait for a pullback and look for an entry at $1.60 per share.  
Stop Loss, stop loss orders not permitted by most brokerages on OTCBB stocks.  Readers should use their own discretion and risk tolerance.  The company's 52 week low is $1.25 per share.
Target Price $2.00, the company raised $5.75 million in a private placement at $2.00 per share in March.  

Their customers include the NY Yankees, Denver Broncos, the Mattel and Fisher Price company owned stores, 300 of the largest museums in the United States, Zoos and Theme Parks, and the New Balance company owned stores.

There are only 3.1 million shares issued and outstanding. The company enjoys about $20 million in annual sales and positive cash flow. In fact, according to the June quarterly financial statements, the company's balance sheet now has hit the $3.48 per share mark in cash ($11 million) with no debt.

Therefore, at about $5 per share you are only paying about $1.50 for the business, or $4.5 million in valuation. $4.5 million for a company with $20 million in annual sales, 10,000 customers, and positive cash flow is a steal.

I still believe the stock is worth at least $8. However, it is not really a trader. You just have to put it in your portfolio and wait for the market to recognize the value. If you want to buy this stock, use a limit order.  You are buying in the open market right along with the CEO.

As it exists today, NetWork Installation is on track to deliver $2.5 to $3 million in revenues this calendar year. They have positive cash flow from operations.

Their early customers were K-12 school systems. They have expanded dramatically in the last several years. Here's a list of their current existing customer base. I'm sure you will agree, it is impressive:

Los Angeles County
Orange County
UCLA
USC
Nearly every school district in LA, Orange, and San Diego Counties
Safeway and Vons
Travellers
Cisco
IBM
SBC
UPS
WalMart
Wells Fargo
and many more (that's enough for now)
NetWork is considered the premier source in Southern California for any business or institution's technology needs. Want a video conferencing system? they will install it. Want a broadband network? they will install it. Want a Wi-Fi hot spot on Campus- they will install it and maintain all of it. You can visit their corporate web site at www.networkinstallationcorp.com.  
  NetWork's Expansion To Wi-Fi - It Starts Now  

On Friday, just after the market closed, NetWork Installation announced they had been approved by Motorola (NYSE: MOT) to become an Authorized CanopyTM Solutions Provider. Click Here to learn more about Motorola Canopy.



The Motorola Canopy, which you see pictured here, is the latest and most powerful generation of Wi-Fi infrastructure technology. This device was 10 years in design and testing, is very easy and inexpensive to install, and very powerful.

Unlike the "Hot Spots" you see at places like Starbucks where the broadband internet access range is only about 300 feet, the new Motorola Canopy has a line of sight range of two miles.  

NetWork Installation is now going to start moving into the WISP business (Wireless Internet Service Provider). With the Motorola Canopy as their infrastructure backbone, NetWork can provide broadband internet access for homes and businesses very inexpensively. Broadband access for speeds equivalent to T-1 can be provided to customers for as little as $400 per month. Cable modem speeds can be easily provided to households with no hard wiring required.
  Conclusion  


As I stated last weekend, NetWork Installation is a Wi-Fi idea no one knows about. You are the first. The company's business history, expertise and solid customer base offer protection against the downside risk. The expansion into the Wi-Fi market offers unlimited upside potential.  

There are just under 11 million shares issued and outstanding, but only 450,000 are publicly traded as of this time. This stock could be quite volatile as the audience grows and it begins to trade.

Wi-Fi is in its infancy. It reminds me of analog cellular in the early days without the enormous upfront infrastructure costs. WISPs are ideal for the millions of internet users in rural areas who do not have broadband access. I described in last weekend's edition on the Wi-Fi revolution. Click here to read that edition if you missed it.

I haven't included a chart of the stock because there is no trading history to look at. Basically, the stock is about $1 and has been for a few months. Volume is extremely limited as no one knows about it. There isn't much information published on the company yet- but it's coming.

I strongly recommend you establish an initial position in this stock immediately. There will be a lot of corporate activity over the coming months as the company expands into the Wi-Fi arena setting up both WISPs and installing Wi-Fi infrastructures for their massive existing customer base.

Out For a Kill- This Steven Segal thriller is also in post production right now. Studios will be reviewing the film soon, and it is expected to go to major theatrical release. Family Room has 10% of the producer profits on this film.
Belly of the Beast- This is the third Steven Segal thriller produced by Family Room, has been filmed in Thailand. This film is also expected to go to major theatrical release. Family Room also has 10% of the producer profits on this film.
Micronauts- Two weeks ago we covered this project. Family Room has acquired the rights to Micronauts, a very popular comic book and TV series from the late 70's and early 80's. In partnership with Hollywood heavy weight Gale Anne Hurd, Family Room intends to develop a feature length film, a TV show, and merchandise the brand. Hurd is the highly acclaimed producer of Terminator, Armageddon, and the Hulk. She is considered one of the most successful producers in the comic book/fantasy genre. Family Room and Hurd are now "pitching" the projects to the major Hollywood studios for partnerships and financing.
Red Skelton Direct Marketing Project- As previously announced, Family Room is entering the direct marketing business. The company is producing commercials to market episodes of the Red Skelton show on VHS and DVD over cable networks. Commercials should start running in about two months.
Snakeskin- Emmet/Furla will produce Snakeskin- it is a movie about a man who specializes in acquiring rare antiquities for the highest bidder and must hunt down his genetically enhanced ex-partner who has stolen a package that could change the balance of good and evil in the world. Snakeskin will be directed by Dario Piani. who has been directing commercials for Ferrari and Mercedes Benz. The movie is beginning the casting process now, and they expect to begin filming by the end of the summer.
Love Song for Bobby Long- directed by Shaniee Gable and which stars John Travolta and Scarlett Johansson. "Love Song for Bobby Long" is currently filming in New Orleans.  
Control- which begins filming in August, starring Matt Dillon, Willem Dafoe and Michelle Rodriguez.

In our July 28 edition, Making Telecom, Nanotech & Biotech Baskets, we illustrated how diversification can lead to tremendous gains.  Owning companies of different market capitalizations, multiple sectors, and holding them for different time frames is a creed all of our readers should put to heart.  This is why we introduced "baskets" when presenting ideas to our readers.  Baskets are groups of companies that are either in the same sector or have similar characteristics.

We decided to take a look at how well these baskets have performed and the numbers were quite compelling.  Nineteen out of twenty six companies saw an average gain of 61.54% while the remaining seven had an average loss of just 4.26%.  Try finding these types of results in any other online newsletter.

What is the next basket that we should focus on?  We asked readers and received hundreds of ideas with our favorite being buyout/takeover plays.  This basket idea makes perfect sense right now because the pending market decline will mean the opportunity to enter positions at better prices.

Our readers have often provided us with many great ideas.  We have so far come up with four companies that look ripe to be taken over.  Unfortunately, one of them had to be removed from our preliminary basket because it was bought out today.  Mercator Software (MCTR) was purchased by Ascential Software Corp. (ASCL) for $106 million.  Ascential said it would begin a cash tender offer for Mercator's shares, offering $3 per share, a 22% premium over Mercator's latest share price.  The premium is somewhat deceiving because rumors of a buyout has been floating around with shares being bid up significantly since trading at $1.58 per share less than three weeks ago.

Could the other companies in the basket experience the same kind of appreciation?  We certainly think so but buyout plays sometimes take a long time to come into fruition.  Our goal is to come up with as many qualified stocks as possible to put into the Buyout Basket.  We are looking for companies of all sizes in every industry.  This is a daunting task but certainly one that can prove to be very profitable for readers.

As always we appreciate feedback from readers and if you have a buyout play that looks interesting let us know by sending an email to editor@smallcapmarketwatch.com.

Pluristem Comments On Cord Blood Stem Cell Act of 2003

Pluristem Life Systems (PLRS) issued a press release today in regards to how HR 2852 (Cord Blood Stem Cell Act of 2003) a bill introduced to the U.S. House of Representatives could be advantageous to the company.

More and more companies are finding the virtual reality promotion and advertising provides an outstanding return on investment in a high impact format.

While VirTra Systems continues to aggressively pursue the "Use of Force" Training market, but investors should not overlook the advertising and promotions market. The company is also aggressively pursuing new business in that arena. The success of the Pennzoil tour and now the Red Baron tour has opened many doors for VirTra.

The stock is probably entitled to bounce back into the $.10 to $.12 range on this news.

I recommend you go to the company's web site and sign up to be included on their mailing list. Click here to go directly to the form. The company will automatically update you on unfolding events once you are on their list. Full text of the news release can be found at the bottom.
  Amnis Systems (OTC BB: AMNM)- Press Release Provides Clue to the Future  


Amnis Systems was in the news earlier this week with a reseller distribution agreement. I didn't have a chance to cover the event, but quote in the press release bears reprinting. As follows:

"Amnis is on target to sign a minimum of four (4) new resellers in the third quarter of 2003," said Scott Mac Caughern, President and CEO of Amnis Systems, Inc. "Our order pipeline continues to rapidly recover as new order input for the fourth quarter of this year is expected to double the third quarter's orders."

One can surmise from this statement that Amnis will enjoy accelerating sales for the remainder of the year, with the 4th quarter bringing a climax. Amnis is another stock which is probably oversold.

Why is the SmallCap MarketWatch focusing on Bluefly?  We took a look at the stock's chart and noticed that shares of the company spiked every few months in the past year.  What was the cause?  Well...it seems that every time Bluefly announced that Soros put in more money the stock would have a nice short term spike.  Take a look at the press releases and the corresponding figures below:

July 17, 2003 SOROS MAKES ADDITIONAL BLUEFLY INVESTMENT
May 22, 2003 SOROS MAKES ADDITIONAL BLUEFLY INVESTMENT
March 14, 2003 SOROS MAKES ADDITIONAL BLUEFLY INVESTMENT - Bluefly Receives $2 Million, Eliminates $3 Million of Debt, and Gets Commitment For Another $1 Million
The average return for the stock on these three financing announcements has been 46.07% but this figure is based off of the stock's high for the day.  The bottom line is that people who owned shares of Bluefly when the Soros funding announcements have been made reaped small fortunes.


The Dilution Factor

The Soros and Bluefly relationship intrigued us so our next step was to dig into the company's SEC filings.  What we found was quite interesting.  To date, Soros has invested about $53 million in the company and holds 89.9% of Bluefly's outstanding equity. Including all options and warrants held by employees and others, Soros owns about 76.5% of the equity.

Bluefly closed Thursday at $1.05 per share giving the company a market capitalization of $11.6 million based on 11 million shares outstanding.  That is actually a very low valuation given that the company has $0.23 cents per share in cash and $30 million in sales for 2002.  This is where most investors will make their mistake.

The $53 million Soros has put into Bluefly may give the impression that the company is cheap but people may not realize that the billionaire financier owns preferred stock that can convert into common stock.  There are currently only 11 million shares outstanding but there are five rounds (A-E) of preferred stock that can convert into 43,323,430 common shares.

What's The Company Really Worth

The Series A-E convertible stock plus the current 11 million outstanding would be a grand total of 54,323,430 shares.  $1.05 per share would equate to a market cap of approximately $57 million dollars.  However, if you take the current market capitalization of $11.6 million and divide by the total number of potential shares then the price is more like $0.22 cents per share.

What's the company really worth?  The number is somewhere in between but let's compare Bluefly to Amazon.com (AMZN).  Bluefly is not profitable so we'll take a look at the price to sales ratio, which is widely used for internet companies.  Amazon currently has a market cap of $15.5 billion, which is 3.47 times its trailing twelve months revenue.  Bluefly has $31.2 million in trailing twelve months revenue and based off of the convertible diluted scenario the company would be trading at 1.82 times sales.  Before you think Bluefly is undervalued keep in mind that Amazon is the dominant e-commerce player with billions in sales and also has profits.

Soros is undoubtedly a genius when it comes to finance so is he onto something or just making a bad decision with Bluefly?

How To Play This

Looking at this company from a long term perspective its clear that Soros is the lifeline.  He can choose not give Bluefly any more money but if this were the case he probably would have cut them off a long time ago.  This is still a significant risk because the end result would be bankruptcy.  However, knowing that Soros owns all this preferred stock makes it less likely that he would choose not to fund the company in the future.

If we look at Bluefly from a short term trading perspective the last three financing announcements have created spikes in the stock that have averaged 46.07%.  Its impossible predict the exact date when the next round of financing will be announced but based off of the last three we should be a month to two months away.

The stock's 200 day moving average (DMA) is at a $1.00 and there is significant support for the stock there.  Keep in mind Bluefly needs to maintain a buck or risk being delisted.

We chose to write about Bluefly because it represents a stock that you could potentially trade three or four times per year for some nice gains.  We'll be monitoring this company in the future and we suggest readers do as well.  The key to short term trading is to accumulate enough of these ideas so that there are opportunities arising on a constant basis.

We saw a high trade of $2.20 the morning after this week's trading alert, which was below my $2.50 target and a bit of a disappointment. I was hoping the stock would open a little more favorably, and then trade up like NWIS and IMTO. Instead, we opened high and went down. However, I was looking for this move sometime over the next 30 days. If the company delivers additional reportable corporate events over that time frame, we could still hit the target. In the interim, there seems to be resistance at about $2, which could give way with a couple more high volume days. Perhaps the stock's inability to hold above the $2 level will end up being an opportunity for those looking to accumulate.

Click Here to listen to the Irvine Sensors conference call.
  The Dog Days of August and the Summer Grind- Where Are We Headed?





We're smack dab in the middle of the Dog Days of August, and both price movement and volume on all the major exchanges are anemic to the point of a near coma state.

The market has been grinding sideways in a very tight range since the first week of June. After a three month move which took the NASDAQ up 40%, it is entitled to go through a period of "digestion".

All of the action this summer has been in the bond market, which woke up one day and decided to believe in the economic recovery. Over a three week period bonds got slaughtered. The yield on the 10 year jumped from 3% to 4.5%. This represents a 50% move to the upside in yields, and a massive drop in value.

The bond market has stated in no uncertain terms it is prepared to believe in the economic recovery. The FED can only control extremely short term levels. The long end of the curve, which relates more to the interest you and I pay on debt or receive in interest payments, is controlled more by market forces. Interest rates are climbing because the market believes interest rates won't need to be so low in during an economic recovery phase.
  A Look at the NASDAQ  


Back on July 22nd I published an edition entitled "Are the Bulls Back in Control?". In that edition, we looked at some simple technical indicators, specifically trend lines and measures of support and resistance.

Let's look at where we are today, and try to figure out where we go from here.
 



Here's a chart of the NASDAQ going back to the big run which began in early March. The NASDAQ appreciated a full 40% during this move. I've drawn in the uptrend line. The market displayed a willingness to bounce off the uptrend line until it breached it convincingly at the end of July.

In my opinion, the breaching of the uptrend line for several days signaled a trend reversal, meaning one could expect the market to either pullback or grind sideways for sometime. Does this mean the Bull Market is over?- No, it only means we were entering a long overdue and healthy period where the market will consolidate some of its gains. So- how far will it pull back?
 



Here's a chart drawn over the same time frame with support/resistance lines drawn in. Since the trend has been broken, I now believe a healthy retracement or "digestion" period is in the cards.

The three red lines in the middle represent various levels of potential support. The market is entitled to give back 30% to 50% of its gains, and still be in a long term uptrend. A pullback to the top line will signal about a 35% retracement, and a pullback to the middle line would signal a 50% retracement.

If the NASDAQ does pullback into the 1500 to 1550 range, I believe this move would represent a very strong buying opportunity at a low risk entry point. If the NASDAQ were to drop below the bottom of the middle three red lines, I would tend to believe the Bear Market was not over, and we were in for further price erosion.

So- why the optimism?
  And The Market Grinds On  




This chart of the S&P 500 shows just how long we have been grinding in this tight range. The S&P broke above 960 in early June. Since then it has challenged 1015 twice, and challenged 960 twice, only to grind its way right back into the middle at 990.

This extended period of grinding will inevitably lead to a major break in one direction or the other. The longer the period of congestion, the more violent the inevitable move will be.

Right now, I believe the next major move will be to the upside. My view is biased by my natural bullish inclination- I love the market. Despite the nasty three year Bear Market, investors would do well to remember that over the long term, the market spends a lot more time going up rather than going down. Because stocks go down a lot faster than they go up, bear markets cause a lot of psychological damage.

My belief the Bear Market is over is based on earnings growth. After an extended period of damage, earnings are growing again. Here's are some recent statistics which support this claim:

12 month trailing operating earnings for the S&P 500 stand at $49.74 cumulatively. According to Thomson Financial, analyst estimates of future operating earnings for the S&P 500 over the next 12 months now stand at $57.89- this equates to 16% growth in operating profits- Fuel for a bull market.
June's trade deficit came in lower than expected- probably as a result of the declining dollar- a positive for the economy. (the number was 39.5 billion; analysts were expecting 42 billion)
Retail Sales for the past two months were recently revised upwards.
Weekly initial jobless claims have finally fallen below the 400k mark, suggesting the economy has stopped losing jobs.
The recent Kansas City Fed Manufacturing survey for July had new orders surging to a new high at 24 and both Average Employee Workweek and Number of Employees turned positive (reading 4 and 3 respectively) for the first time since February and June '02 (also respectively).

The March to June rally should be considered the "Hope and Faith" rally. It was based on faith that fiscal stimulus would finally begin to work. Since faith could be defined as hope in the absence of data, it seems faith paid off.

The earnings growth and positive economic reports that are now coming in were already priced into the market during the hope and faith rally. The market may take some time finish digesting those gains.

With earnings season over, the market will turn all of its attention the economy. If the numbers keep improving 3% GDP growth will not be far behind, and higher stock prices are on the horizon.

Network Installation announced today that it has been awarded a $228,000 contract  from the Placentia Yorba Linda Unified High School District.  

Also, the company announced its June quarterly revenues came in at about $200,000. While this number may seem low for a company enjoying approximately $3 million in annual sales, please note that this $200k number only covers the five week period from the May 23rd merger date to the end of June. Evidently, the company is only publishing its financial results from the time the merger was completed via reverse take over and they became a public company. $200K over five weeks suggest $2 million plus over 52 weeks. The September's 10Q will be our first comprehensive look at their financial condition.

I'm anticipating considerable news flow on their move into the Wi-Fi arena over the coming months, which should bring an enhanced audience to the stock. In the interim, investors would do well to remember there is a very small public float, and therefore the stock could be very volatile. Accumulate- but use a limit order. I would suggest anything under $3 would be reasonable at this juncture. Stay tuned for more developments.

Through the power of numbers the PEO has the ability to negotiate better pricing on many employee related costs like health insurance, pension plans and 401K's, workmen's comp, etc. This allows the client companies to offer employees better benefit packages for the same dollars.  

A PEO with 4500 employees generates about $350,000 per day in cash flow, and $25,000 per day in gross profits. IMTO has achieved that level. The infrastructure is in place, so incremental increases in business yield higher margins at the bottom line.

I published a Trading Alert on IMTO on July 11th. The stock opened the following day at $.023 and throughout the course of the day found its way to $.04. It traded 34.3 million shares.

If you bought early you could have made 70% on your money in one day. Amazing- If the stock had been $2.23 and hit $4 that day, the world would have taken notice. If the stock had been $22.30 and hit $40 that day, they would have been calling for an interview on CNBC. Nevertheless, the return to the investor is the same.
  IMTO Back in the News- Reports Major New Contract in Medical Division  




It's time to take another look at IMTO. They were back in the news today with major new contract signings. They are beginning to penetrate the PEO market in the medical industry, and are starting with contract nursing services to acute care facilities and hospitals in Arizona.

IMTO has received approval for a proposed contract with Tempe St. Luke's Hospital beginning this month. St. Luke's is part of the ASICS Hospital Group, which consists of five hospitals in the Phoenix area. The Company has received an initial contract with the ASICS Group, which is forecast at $300,000 for the next 9-12 months.

IMTO has current proposals under review to an additional 10 hospitals in the Phoenix area, which are anticipated to be approved in the next several weeks. These additional agreements are forecast to provide $1 million in annual revenues.

In short, the company is continuing to add employees to its services and therefore growing rapidly.

The stock has completed a pull back and found support in the $.025 range. As you can see from the chart, the stock has pulled back into the middle of its support level, suggesting it has digested its past gains and is poised to start climbing again.

As this company continues to grow, the stock will no doubt want to challenge that $.04 level once again, which is 70% higher than today's closing level. Today's news release, which came out after the close, will probably give observers the opportunity to see if $.04 is still resistance, or simply gives way to higher levels.

IMTO mal anschaulich, geschlossen heute mit 20% Aufschlag bei 0,29.
Etwas mehr deutschen und eigenen Text von Dir wäre nett, wenns machbar ist.

chart.bigcharts.com/bc3/quickchart/...71&mocktick=1&rand=4917"

Gruss E.

The Use-of-Force simulator market is huge and growing along with terrorism and the international turmoil. Competitors with inferior products who were earlier to market have seen sales grow dramatically in past years. Firearms Training Systems, with their simple two dimensional simulator, does about $40 million in annual sales. Interactive Training, Inc does business in 40 countries and also enjoys millions in annual sales.

Pictured here is the portable version of VirTra System's new 3d use of force training simulator; the only one on the market providing a true 360 degree training environment, complete with sight, sound, smell, and the trainee's ability to use the actual weapon to be used in the field, not some plastic version. They have the product. The next step is sales coupled with price appreciation in the stock. Today, they made a major step in that direction:
  VirTra Systems Hires "Best of Breed" Sales Manager  




Today, VirTra Systems took a quantum leap towards getting the new Use of Force Simulators to market. VirTra announced it had hired Michael Kitchen to head up the national and international sales force for this brand new product line.

According to the press release, Michael Kitchen jumped ship from competitor Interactive Training, Inc to join VirTra Systems. The press release further stated that "Mr. Kitchen and his worldwide distributor network have sold several hundred simulators to military, security, and law enforcement agencies in over 40 countries."

Apparently, Mr. Kitchen feels the VirTra has developed a "better mousetrap". In the press release, he states that "I'm convinced the company will soon lead the industry with our 360° multisensory situational awareness and judgmental use-of-force firearms training products.”

I'm still a believer that Virtra Systems can easily find its way into the $.20 to $.25 range if and when they begin to sell these new systems. The stock tripled off the lows after they unveiled this new line of products. They now have a sales manager with an extraordinary track record in 40 countries including the United States. The stock will undoubtedly gain traction along with the company. Along the way you look for little clues which could lead to success. The company delivered a pretty big clue today.

Readers have emailed us about how we picked these two companies and for that matter any company that we feature in the SmallCap MarketWatch.  Our answer is quite simple...a tremendous amount of due diligence coupled with experience and also a bit of chart reading.  Sounds easy enough but everyone knows it's easier said than done.  That is why in today's edition we will illustrate to readers the process that we went through in evaluating ScanSoft and Hollywood Media.

ScanSoft (SSFT) was a very attractive situation because the company had warned that they would miss revenue and earnings estimates on August 6th.  Overnight the stock dropped from the previous day's close of $4.83 per share to $3.70 per share.  That is a pretty big haircut but things got worse when shares hit an interim low of $3.32 per share.  Volume was obviously very high with over 8.5 million shares changing hands in three days.  Then the stock stabilized at the $4 dollar level and that is when we decided the timing couldn't be better.

The bad news was already out and the only catalyst for the company was the actual earnings announcement.  It was very unlikely that any more negative items were to be reported so the potential for upside news was very high.  The company had announced that it closed its merger with SpeechWorks five days after the earnings warning.  This set the tone because if you were ScanSoft wouldn't you want some good news to follow the announcement that you have completed a merger?

The first of the many press releases came on August 19 when the company announced that had inked a deal with the Social Security Administration (full press release).  This was followed the next day by the naming of a new chief financial officer (full press release).  Then yesterday the big daddy announcement that ScanSoft teams with Microsoft to enable paperless medical records by integrating speech scanning helped move the shares up over 7% (full press release).

Now here comes our thinking from the short term perspective.  You have a company that was at $4.00 per share with support at the $3.65 levels that had all the bad news out.  It would make sense that good news was to follow since the merger was done.  Remember that after a merger there is always good news announced to make shareholders on both sides a little happier.  Long term the new ScanSoft expected 2004 revenues of $200 million and earnings of $0.42-$0.43 per share.  Thus, the company was tremendously undervalued based on those expectations and if there was ever a time a long term investor wanted to own shares it would be when we released our edition.

The returns generated by this idea yielded an interim high of 20.25% and a current return of 16.5%.

Hollywood Media (HOLL) was more of an experience call than anything else.  Shares of the company traded at the $1.30-$1.50 levels the previous two months but tanked as the company got close to reporting its second quarter earnings.  There was no specific reason for the decline other than shareholders selling and when the earnings were reported nothing happened.  It was rumored that one of the institutions that owned shares of the Hollywood unloaded its position and that caused the previous few weeks decline but we don't know this for sure.  Either way the stock drifted down to a dollar where it was floating at a major support level and also 200 day moving average of $1.03 per share.

The company seems to have a history of violent moves in its stock and the reason is its interesting shareholder base.  There are currently 20.9 million shares outstanding with 19.3 million in the float.  Institutions own 66% of the company (view institutional holdings), which is approximately 77% of the float.  Coupled with the 8% that insiders own this means roughly 3 million shares are in the hands of the public.  This means that the low number of tradable shares makes this a highly volatile stock.  As traders know, volatility creates price moves which generate opportunities.

Looking to the long term horizon, what attracted us to Hollywood Media was more fundamental than anything else.  It's rare to find a $20 million dollar company with such a diverse foothold in different aspects of media.  We stand by our assessment that this is world's cheapest full fledged media company.  The chart as well as the tape told us that the company was due for a bounce.  The challenge would be to get past the resistance levels at $1.25 per share but surprisingly this level has now become a support level.  If you missed our edition on the company we suggest you take look because it's worth reading (full edition).

It came as a surprise that Hollywood Media proved to be such a successful play so quickly.  It's interim high of $1.33 per share equals a 24.29% gain from when we wrote about the company when shares were trading at a little over a dollar. With over $60 million in revenue per year the company is valued at approximately .4 times sales.  Long term the potential for this company could be a market capitalization more in line with other media companies.

The SmallCap MarketWatch tracks hundreds of stocks.  Our goal is to present great risk to reward ideas that have the potential to benefit subscribers.  Not every one of them will turn out perfectly but if you look at our track record we are most certainly right much more than wrong.

  Irvine Sensors (NASDAQ: IRSN) Delivers Big News In a Small Package



If you're looking for a little excitement from Irvine Sensors, they delivered the goods on Friday morning. Much to my disappointment, there hadn't been much coming out of the company for the last several months. Last week they unveiled their new BGA stacked product, which has the potential to take the company to a whole new commercial level. Friday they delivered more.

This company is like a duck. It appears to be cruising along serenely on the water. You don't see their feet peddling wildly below the surface.



You are looking at the world's smallest fully featured computer, and it was unveiled by Irvine Sensors this past Friday morning. It is powered by an Intel® 32-bit SA-1110 StrongARM® 206 MHz processor. It has solid state memory provided by 8Gb of solid-state storage using 16 Samsung® Flash memory chips. In short, this mini computer has horsepower equivalent to many specialized use laptops.

As you can easily see from the picture, this computer isn't much bigger than a quarter. It's about 1 inch square and 1/2 inch high. It could fit inside a large wrist watch. This unit becomes a fully functioning computer when you attach a mouse, keyboard, and monitor.

Irvine Sensors is beginning to prove they are the kings of small and powerful in the computing world. I expect it to convert into recognition for the company, which hopefully translates to enhanced volume and appreciation in the stock.



As you can see from the chart, Irvine Sensors briefly touched off a new multi month high last week on the heels of announcing they were taking orders for the new BGA stacked memory products.  

I believe a few more high volume days like that one will peg the stock at a higher level. The stock needs more consistent high volume days. Introducing the world's smallest full featured computer is bound to bring some media coverage from somewhere, which could lead to the enhanced volume the stock needs.

This stock is a good value proposition. Although it's certainly not an apples to apples comparison, Intel is up 70% since the beginning of March, and Irvine Sensors is only up 24% since that day.

Intel trades at about 6 times annual sales, and Irvine Sensors is only trading at 1 times annual sales. Intel closed just over $27 on Friday, down from an all time high of $76. Irvine Sensors closed at $1.75, down from an all time reverse split adjusted level of $350 per share. Intel has shrunk in the last few years. Last fiscal year was the best Irvine Sensors had in their 20 year history, with revenues increasing 50% over the previous year to $15 million. Intel makes money. Irvine Sensors is still reporting small losses.

Look for announcements of sales of the new BGA stacked memory products to give the stock some traction. There are no guarantees, but management has a very high level of confidence that they are finally going to commercialize their $200 million 20 year investment in technology.  

Nothing ever goes straight up. Once the trendline was broken, the stock was entitled to pull back into the 50% retracement range off the move it had started in early May, which was when the stock was priced as if the company were about to close its doors.

New management and new money has the company humming and gathering momentum. Today, just after the market closed, Amnis announced it had received new orders from fourteen separate accounts during the first half of the third calendar quarter. Boeing, Hughes Networks, Best Buy, Matsushita (Panasonic) and Northrop Grumman are a sampling of customers purchasing Amnis Systems equipment in recent weeks.

According to company President Scott Mac Caughern, Amnis's revenue stream for the September quarter should double that of the June quarter. I believe this is just the beginning of a whole new era for the company. Momentum should continue into the Fall, but sales could really skyrocket when the company makes planned new product introductions before the end of the year.

The stock will probably begin a climb back towards $.15 now that the company has delivered very positive news and the stock has found support. However, I still believe the stock could see $.25 over the longer term.  

In studying the business model of Titan, I was amazed to learn there is a huge cottage industry associated with Printed Circuit Boards. When the engineers at Textron, Lockheed, or Motorola design a new electronic device, they must build prototypes long before manufacturing. They don't build the PCBs themselves. They send the specs to a shop which specializes in fabricating PCBs and turning around a finished product rapidly.  

Titan does this high margin work. PCB designs are received and a finished prototype is turned around in as little as 48 hours. The service costs a substantial amount of money, and has very high margins.  

Titan turned in the best quarter in its history in June, with sales hitting $3.27 million for the quarter, up 42% from the March quarter. They're customer base includes some of the following high profile names:

Motorola
Broadcom
Textron
Lockheed
Analog Devices
Raytheon
Flextronics
Titan has two major fabrication facilities. Their west coast operation in Fremont, California, which is the subject of today's news release, specializes in high volume, quick turn around for standard consumer electronics products. PCB prototypes can be turned around in about 48 hours, and may cost anywhere from $25,000 to $100,000.
Their east coast facility in Amesbury, Massachusetts specializes in more custom PCB's generally associated with military or very high tech solutions. At this facility, Titan provides input on the design. They can also fabricate PCBs in HVR (High Volume Rigid Flex). This specialized design costs a lot more, and is the kind of custom PCB you would find fitted into a tiny slot in the cockpit of an F-14 fighter jet or the Space Shuttle. Margins at this facility run upwards of 40%.
  Completed Consolidation Chops $1 Million off Annual Overhead  


Today, just after the market closed, Titan General announced it had completed a consolidation of two west coast facilities. Titan shut down their Santa Clara operation, and consolidated the two into one state-of-the-art facility.  

More importantly, the company announced it anticipated the consolidation would yield at least $1 million in annual cost savings. This is very important to Titan, because it positions the company to move into profitability in coming quarters.

Moreover, there is another important fact the press release does not tell you. I learned this from interviewing President Andrew Glashow. The  
Fremont California tech center of Titan is so well optimized that it is currently only operating at 30% of capacity with much improved margins. Therefore, as additional business flows in, it will be accompanied by even greater efficiencies which should result in higher margins as the current fixed expenses are already being absorbed.  

The new facility has now been approved by several major electronics companies including manufacturing behemoth Flextronics ($13.5 billion in annual sales), which should lead to major new business wins.

There are 14.5 million shares issued and outstanding. Based on the $1.20 closing price, this yields a market value of $16 million. Annual revenues are running at about $13 million, and growing rapidly. Cost cutting from the consolidation should turn Titan profitable, and revenues should grow. Assuming the company achieves positive cash flow, this stock would not be overvalued at two to three times sales, instead of the current 1.2 times annual sales, suggesting significant upside.



As you can see from the chart, no one knows about this situation yet. This is an undiscovered gem, just like Network Installation was on August 2nd. The stock has drifted down from the $2.25 level in April and rarely trades over 25,000 shares per day. The profit picture for the company's future changed with today's news.  

Here are my thoughts for today's trading alert:

Buy up to $1.40- This gives you room to make 40% if the stock performs the way I think it will
Price Target- $2 short term (next 60 days)- higher longer term
Stop Loss- Reevaluate if the stock trades below $1- I don't think it will, but you never know.  
Unless something earth shattering comes up, this will probably be the last edition I publish until after the Labor Day holiday. I intend to publish several follow up editions on Titan. Also, next week threatens to be very busy, as several of the companies I cover are promising substantive corporate events which will be worth reporting.  

NetWork Installation (OTC BB: NWIS) Secures Agreement With Vivato

Network Installation has settled into the comfortable $2.50 to $3 range after making its breathtaking two day run to $6 back in August. As I stated in several past editions, I believe the stock was well ahead of itself at $6, and was probably a better sell than a buy at that level. However, at less than half the price, the stock now offers significant upside potential as the company leverages its considerable networking experience to enter the exploding Wi-Fi (wireless internet access) market.

Today, just after the market closed, Network Installation made an announcement which solidifies another piece of the puzzle. The company announced it secured an agreement to become an authorized VAR (value added reseller) of the revolutionary new Vivato switches. Vivato is a private Bay area company which has secured $67 million in financing to develop wireless indoor and outdoor Wi-Fi routers.



The current technology, which is deployed in the typical "hot spot" you find at Starbucks or Borders Books has a range of about 300 feet. The new Vivato technology provides a range from 300 meters to 2 kilometers, and is being referred to as a "hot zone". Vivato offer products for both indoor and outdoor use. You can learn more about the company by visiting their web site at www.vivato.net.

When you couple the Motorola Canopy technology, which Network Installation announced it was approved for back on August 1st, with the new Vivato technology they announced today, you have the ingredients for state-of-the-art Wi-Fi solutions.



The Motorola Canopy provides wireless broadband internet access from a tower on line of sight with a range up to five miles. The Vivato switch then converts the Motorola access into a true Wi-Fi solution on bandwidth 802.11 with much higher ranges than the 300 feet currently available.

As disclosed in today's press release, St. John's University recently allocated $7 million to install a campus wide Wi-Fi solution. Once implemented, the University intends to offer virtual classes and lectures which will be broadcast over the Wi-Fi network.

NetWork Solutions already boasts USC, UCLA, and a number of other educational institutions amongst its customers. This is just one arena for expansion. The company can also provide the infrastructure for a WISP (Wireless Internet Service Provider), which would include a recurring revenue business model.

The final piece of the puzzle is in place. Stand by for developments as the company moves into the Wi-Fi arena. Accumulate at or below $3 for what I hope will be a move back to $6 on real fundamental developments.


  SHEP Technologies (OTC BB: STLOF) Provides Update On Progress  


Just before the market opened today, SHEP Technologies dished up its first corporate development in nearly two months since the company announced it planned to apply for an AIM listing on the London Stock Exchange and had appointed a new Chief Technology Officer.

I have received dozens of emails on SHEP, as it has become highly controversial. The stock went crazy in June, running from a low of about $.75 and achieving the $3 mark in a few short weeks.

This company has been the target of a smear campaign throughout the summer. Well known shill for short sellers Carol Redmond of Dow Jones has been bashing the company excessively along with several other powerless entities.

The run in June was probably the result of a "short squeeze" in the stock. However, if you look at the fundamentals of the company, you can easily understand why short sellers would be in the stock. After all, the company has no real hard assets, very little cash, and no revenues. In fact, as I stated in my first edition on SHEP, I didn't expect the company to generate any revenues in 2003.

With a market value north of $25 million you can't blame short sellers for taking an interest.

My view is simple. Nothing has changed since I first published on this company. I believe the stock is too risky for many investors. I believe their technology is very exciting and could eventually end up on millions of motor vehicles world wide. I believe everyone should own a few shares of this company is case they pull it off. I suggested 2.5% of your high risk capital be allocated for this stock, with an eye towards increasing your allocation to 10% over time. Click here to read my original edition on SHEP Technologies.

The detractors of the company have one disadvantage. I went to Detroit and drove the Lincoln Navigator which was fitted with the SHEP system. I saw it work. I don't know whether they will ever reach their potential. If they do, you will wish you owned a few shares.

I'm planning much more comprehensive coverage on this company either later in September or early October. This coverage will clear up many of the questions you may have concerning their direction. Stand by.

As I stated, Carol Redmond of Dow Jones has been bashing SHEP Technologies. She was also bashing Hi Energy Technologies (OTC BB: HIET) earlier this year. The stock dropped from $2.50 to $.25. Recently, on the heels of great fundamental progress, the stock has run all the way back to $1.50. You can't believe everything you read- either from Carol Redmond or the OTC Journal. Differing opinions are what makes a market.

  StockGroup Information Systems (OTC BB: SWEB) Gets $.60 Price Target  


On Tuesday morning, just prior to the market opening, unbiased Investrend analyst Ryan Fuhrmann placed a $.60 price target on StockGroup.

If you are looking for unbiased opinions on stocks, you won't find them at the OTC Journal. I am very biased, and won't report on a company unless I like it. I like StockGroup, and have since I started covering the company one year ago at $.19.

Sooner or later StockGroup simply has to take off. The stock has been stuck in the mud since January when it briefly attempted to eclipse $.40. Since then, the stock never trades below $.25, but struggles to trade above $.30.

Investrend has been projecting this stock will trade above $.50 for two years now. Sooner or later they are going to be right as long as the company continues to grow.

Look for StockGroup to finally trade at higher levels when you least expect it. If the company keeps growing at its present rate, eventually Investrend will be right.


  Titan General Holdings (OTC BB: TTGH)  


Last week's trading alert on Titan General has been a non-event so far. The stock traded heavy volume the following day between $1.30 and $1.40. This week it has stayed in that range on lighter volume.

I suggested a mental stop loss of $1 on the stock. You might consider raising the stop loss into the $1.15 to $1.20 range if the stock trades down to that level. I don't believe it will, but you never know. You cannot file a formal stop loss on the stock- you just have to watch it and sell if you see it trade down into that range.

The company is growing rapidly and should be able to deliver more compelling fundamental developments during September. My time frame for this idea was 60 days, so we still have plenty of time for a surge to the upside.

Family Room (OTC BB: FMLY)- Back in Theaters This Fall





Family Room was back in the news this morning with several positive developments which bode well for shareholders. The company announced that filming has begun in Eastern Europe on a film titled "Control". Ray Liotta plays the lead role, with Willem Dafoe (Spiderman) and Michelle Rodriguez (S.W.A.T., The Fast and the Furious) costarring.  

The news release went on to reveal that, "Wonderland" starring Val Kilmer, Lisa Kudrow, Kate Bosworth, and Dylan McDermott has been accepted into the 2003 Toronto International Film Festival and will have its world premier at the Festival. Emmett and Furla executive produced "Wonderland" which was directed by James Cox. Lions Gate will release the film theatrically in September.  

Family Room has a percentage of the producer profits for Wonderland. Lions Gate is distributing the film, and it will be in theaters. If the film garners audience acceptance, and does somewhere in the range of $25 million at the box office, Family Room is likely to enjoy some producer profits from the film, which will flow right to the bottom line.

Other projects in the pipeline of new properties also all hold profit potential for the company. Most of the current projects are listed in today's press release.

For immediate profit potential, management at Family Room is very excited about the remake of the Amityville Horror which was previously announced, and the Abominable Snowman project the company will coproduce with Ilya Sulkind of the Superman Series and Gale Anne Hurd, the producer from the Terminator Series and the Hulk.  

There has to be at least one big winner in the last of projects you will find in the press release below. I don't know which one it will be, but I do know that a $1 million profit payday on one of these projects turns into $.05 per share in earnings.

I still believe this stock will find $.25 before the end of the year. Some catalyst will drive this stock higher. In the meantime, very low risk entry point in the $.12 to $.14 range.

Today, shares of the company hit an intraday high of $1.43 per share riding the momentum from yesterday's news that Bluefly.com Net Sales Increase by More Than 26% in August.  Since we profiled the company less than a month ago the stock is up an interim high of over 36% and there is the distinct possibility of another Soros funding announcement around the block.

It Might Be Soros Time

This year the three Soros financing announcements were made on March 14, May 22, and July 17.  We can estimate from this schedule that another press release could happen in the next two to three weeks.  There is of course no guarantee that more funding will occur but Soros has invested approximately $53 million and holds 89.9% of Bluefly's outstanding equity.

Brink Of Breaking Out

Bluefly has shown incredible strength the past two trading sessions by reaching an intraday high of $1.43 which you can see from the chart below is the second highest point in the past six months.


Charts Courtesy Of Stockcharts.com

Now would be the best time for a Soros financing announcement to be made in order to keep the momentum going.  There is serious resistance at the $1.40 level but no so much as to suppress a rally with significant volume.

Late To The Party

Readers that own shares at our initial profile price of $1.05 per share are sitting pretty but current prices are 36% higher.  We are firm believers of not chasing a stock but everyone has their own levels of risk tolerance.

Ideally, shares will drift down in the next week or two so that people can get better entry points.  This may be unlikely if everyone anticipates a financing announcement which thanks to the SmallCap MarketWatch is now something many readers know.