Once again, Challenger’s (OTCBB: CPWB) powerboats have done extremely well on the racing circuit. Team Gallagher, driving a Challenger DDC-28, took 2nd place at the Key West World Championships held a couple of weeks ago. Congratulations are on order not just for this race, but for a great season. Team Gallagher has been burning up the track, errr…the water all year long.

It’s also a victory of sorts for shareholders. Each time a Challenger boat crosses the finish line before the vast majority of the rest of the boats in a race, Challenger gains credibility. Credibility should eventually lead to sales, which in turn will lead to profits. We think Challenger is a prime example of how building a ‘best of breed’ product is critical to their success, as the performance boating industry is highly competitive. From what we’ve seen, the DDC-28 (and the DDC-30) seem to be just top-notch. That’s why we think good things are finally on store for this company and its shareholders. And speaking of…..

…..perhaps the vindication has already started. For the first time in a looooong time, CPWB shares have spent more time above their 20 day moving average line than below it. So, clearly there have been more buyers than sellers since early November. However, what we think makes an even more compelling argument is the persistence of the buying volume. The four highest-volume days since October (and well spaced out) have all been bullish days, so maybe CPWB is finally turning the corner.

While we’d be the first to acknowledge owning BioCurex (OTCBB: BOCX) could have led to sea-sickness since July, we’d also be doing a dis-service if we didn’t mention we think the stock is at the bottom of a widening range right now. It appears yesterday’s 7 cent rally was spurred by a support line that extends all the way back to July. There was one brief instance where shares traded under this line in August, but overall, we feel this is the line to watch if you’re a trader (we think investors may want to pay attention too though, if you’re shopping for an optimal entry spot).

As of right now, that support line is at 66 cents and rising. The resistance line is rising too…at a faster rate. Currently at $1.14, there’s really no way of telling where it might be if and when it’s finally reached again. We’ll keep an eye on it though, and let you know how it shapes up.

In the ultra-short-term, we’ve seen shares top out around 75 cents a few times over the last three weeks. So, we think any potential ‘bigger picture’ move higher within this rising support and resistance framework is going to first depend on getting past that level.

While there are dozens of ways to measure the ‘value’ of a stock, we think at the end of the day, there’s one simple bottom-line gauge of ‘undervalued’ or ‘overvalued’. What’s that measure? In simplest terms, it’s just whether or not a company is willing to eat its own cooking…so to speak. That’s just our way of saying a company willing to go out in the open market and buy its own shares must be seeing - or perhaps understands their true potential - more than the rest of the market might. After all, money talks (at least talks more than anything else does).

We weren’t surprised to hear Commerce Planet’s (OTCBB: CPNE) board approved a major stock repurchase plan yesterday. We’ve been following their story for a while, and we tend to agree the stock seems undervalued relative to where the company seems to be going. Now ‘the Planet’, with real dollars, is going to sit side-by-side with all the other retail investors out there. Investors may want to take note, as it’s a surprisingly rare occurrence in the world of equities.

The terms are pretty straight-forward. Commerce Planet’s Board of Directors decided to authorize up to $2 million worth of CPNE share purchases. The window on the approval closes at the end of 2007, so they have more than a full year to take any action they feel is merited.

A little math may be in order to really understand the scope of the plan. The terms don’t specify a certain number of shares or a particular schedule, but rather, a dollar amount. But, we can still do a little extrapolating. Dividing that $2 million by the current price of $1.36 translates into about 1.47 million shares. As of right now, there are roughly 47.5 million outstanding shares, meaning the buy-back at current trading levels would put about 3% of the company’s stock back into the treasury. It may not seem like much mathematically, but trust us - that’s a lot in comparison to many other publicly traded companies.

Of course, that kind of buying could translate into a lopsided ‘demand’ side of the supply/demand equation. We don’t think it will be to a dumb-founding degree, but it could be noticeable. Needless to say, we think this is a good thing for current owners.

Click here for full details.

Wow!

That’s about all we can say about it. Clearly Canadian (OTCBB: CCBEF) reached $2.78 today after visiting a low of $2.00 on November 16th. That’s a 39% gain in six trading days, which - as they say - ain’t bad (especially considering it surrounded a major market holiday).

We first mentioned the possibility on November 10th in the ‘Whatever Happened To….‘ edition. But, the past is the past. If you missed a low entry, forget it - it’s gone. Now our collective challenge is to handle what we think could happen next.

The key barrier we saw then was resistance at the 50 day moving average line. It had been a trouble spot before for Clearly Canadian shares, and we had to assume it could be again. Well, after today’s big 10% rally, the 50 day line (at $2.52) has been left in the dust. So, we don’t feel it’s nearly as big of a factor as it was.

Presently, the fear of missing out may well be replaced by the fear of being over-extended…at least in the short run. We’ve seen major short-term rallies like this before from CCBEF shares, but none that have persisted and led to even bigger gains later on. In fact, the today’s high of $2.78 looks suspiciously close to a peak at $2.75 from late October. Between that potential resistance line and being stochastically overbought, we think right now may not be the easiest time to shop for an entry point.

Were it us, we’d rather wait for a pullback of sorts - or at least a consolidation followed by some support - before looking to jump on any bandwagon. Why? These violent surges can come crashing down just as easily, so we prefer to wait for better (and maybe safer) odds when we can. And who knows….maybe the 50 day line will end up acting as the  very support line we need to see.

In what may be one of the finishing touches of a major corporate overhaul, Xtreme Companies (OTCBB: XTME) announced today they’d be changing the company’s name to Challenger Powerboats Inc. - a move designed to reflect the company’s new focus. Along with the name change, the ticker symbol will switch to ‘CPWB‘.

Our opinion? Glad you asked. We think it’s wise move. It’s never easy to leave behind any brand-name equity you may have, but in Xtreme’s case, their most valuable ’equity’ was in the Challenger name….their line of powerboats that’s been building a solid reputation within the performance boat world. The other boat line (fire and police) has been dropped - and for a reason. We’d guess the company just wants a clean slate to work with (even if just psychologically), and this is a way to achieve that.

As for investors, the same clean slate idea may be just what the doctor ordered for them too. We think this is a great company after all the major changes initiated in the last six months, but the market has to look past the…..well, look past their past. If a new name will help, we’re all for it. And yes - we think it will help.

In fact, we see shares perking up already. They’ve started to make higher highs off of a support line around 3 cents, and in the wake of an oversold condition. The buying volume recently, although still a little modest, has at least been consistent. Maybe this will end up being a new beginning for the company in all facets.

Not that they desperately needed it, but Siena technologies (OTCBB: SIEN) just garnered a million bucks worth of working capital. Procedurally speaking, it’s no big deal - small companies sell stock to raise money all the time. And with Siena doing as well as they’ve been doing in their post-Kelley-acquisition world, it’s not really a concern to us at all. What we found interesting - in a good way - was where these investors came from. Apparently, they were all accredited investors, and already shareholders. Although it’s not ‘institutional’ in the traditional sense, it’s still a subtle endorsement by so-called ’smart money’. If they already own some of the stock, and are willing to come back for another big chunk of more, then they probably see something they like. That’s a good sign. 

For the full details, click here. 

The register is ringing again for On The Go Technologies (OTCBB: ONGO). Yesterday the company reported a $60,000 sale was made to a major Toronto-based broadcasting company. The company is a long-term customer for On The Go.

You can add this shipment to the growing revenue tally we’ve been monitoring for On The Go, which has become pretty large in the early portion of their fiscal year. Just take a look at some of the recent sales results by clicking here.

Don’t forget, SmallCap Digest offers free stock ideas and market commentary through our e-newsletter. Be sure to sign up today using the link in the top right corner…and don’t forget to respond to the confirmation e-mail. Or, add us to your RSS feed using the link in the left-hand column.

After its official launch just three week’s ago, ByIndia.com has started to draw a crowd…so to speak. The owner and developer of ByIndia.com, Web2 Corp. (OTCBB: WBTO), announced today ByIndia.com’s Alexa ranking - a site popularity measurement service - had risen from 750,000th to 12,745th. Considering there are literally millions and millions of Websites out there to compete with, that’s a very impressive move. Alexa also indicates 85 out of every 1 million Internet users visits ByIndia.com. Again, it may seem like a tiny fraction (and it is), but it’s actually very impressive by Internet traffic standards. For an idea of how quickly this site is becoming popular, only 20 out of every 1 million Internet users visited ByIndia.com last week. Once they got to the site, the number of pages viewed per visitor increased by 50% since the launch.

We think this is a good sign for the enterprise. While there’s still no word on revenues yet, we feel being able to gather ‘eyeballs’ as they have is at least a step in the right direction. We’re looking forward to seeing how the site continues its development.

For the full press release, click here.

Even still hearing the echoes of their Q3 earnings announcement, Xtreme Companies (OTCBB: XTME) is hard at work on their Q4 results. This weekend - beginning today actually - they’ll be showcasing their Challenger Powerboat line at the annual St. Petersburg (Florida) boat show. A big venue? You bet…the St. Petersburg show is the largest show on the gulf coast. And why shouldn’t it be? After all, Florida claims the ‘most registered boats’ title, with St. Petersburg being at the heart of the boating world for the panhandle state.

These shows are a big deal for boat manufacturers, and especially for Xtreme since they have a new powerboat focus to tout. Of course, as well as their Challenger line performs on the racing circuit, we don’t think they’ll have much of a problem creating a buzz at the booth. The exciting part about the St. Petersburg show in particular is knowing that the Florida boat market represents about 10% of the total market in the United States.

For the full press release and show details, click here.

By the way, regardless of any opinion on the company, we think you have to admit the Challenger Powerboat line is pretty cool. The fact that they’re consistent top performers on the pro racing circuit may just be the ‘clincher’ for any undecided buyers.

We’ve been discussing the notion for a while now, but Execute Sports (OTCBB: EXCS) verified the idea during their Q3 with a noteworthy improvement in cash flow.

On a quarter-over-quarter basis, revenues increased from $96,000 to $531,000. Over the last nine months, the company has pulled in $1.6 million in sales, which is a significant improvement over the $1.3 million in sales they had logged by this point last year.

Expenses were up though (primarily advertising and selling expenses), so the loss increased from $340,000 to $1.0 million. On a nine-month basis, the $2.9 million in losses so far is just a hair above last year’s $2.8 million loss they had at the end of their ninth fiscal month.

Our view is a mixed one. We think it’s fantastic to be able to increase the top line - a feat that Execute seems to now be adept at, as we’ve illustrated in our blog entries. On the flipside, we feel the bigger loss despite the improved revenue leaves a ‘doing less with more’ aftertaste. However, it doesn’t necessarily change our recognition that this is a turn-around story; we don’t feel these numbers are entirely out of line for a company that’s been where they’ve been, yet appears to be going where they’re going.

For the full earnings details, click here. To review the entire company overhaul story, click here.

Be sure to listen in on Eagle Broadband’s (OTCBB: EAG) conference call this Friday (November 17th), as they’ll be discussing their full-year results as well as reviewing plans for their future. The call will begin at 5:30 PM EST.

The call is actually a Webcast accessible through the corporate website (http://www.eaglebroadband.com/), and requires Windows Media Player or Real Networks RealPlayer to listen in. If you’d like to submit questions prior to the call, or to learn more, just click here.

Truth be told, we think the strategy discussion about their future is going to be a lot more meaningful than last year’s results. As we’ve mentioned before. Eagle’s entry into the IPTV business is brand new, yet has the potential to completely reshape the company…for the better. We suspect part of the call will be devoted to detailing that enterprise.

Don’t forget, SmallCap Digest offers free stock ideas and market commentary through our e-newsletter. Be sure to sign up today using the link in the top right corner…and don’t forget to respond to the confirmation e-mail. Or, add us to your RSS feed using the link in the left-hand column.

Xtreme Companies (OTCBB: XTME) released their third quarter results yesterday. While most accounting statements usually include some written explanation to add the proper context, we’d say Xtreme’s interesting quarter almost requires it. Before we even dive in, a quick accounting lesson…..

Even the most accounting-averse of our reader probably knows revenue is ‘booked’ when merchandise is sold (or when service time is billed). What may be less understood is that revenue is essentially reduced when merchandise is returned to the manufacturer. Such is the case with Xtreme for their Q3; the numbers don’t look all that great, primarily because a couple of their key vendors returned, or refused delivery of, boats they had agreed to purchase.

The reversal of those sales pretty much wiped out Xtreme’s whole year, at least on paper. But, you should also recognize that their inventory levels shot way up when they for the boats back. Obviously those boats are still ‘for sale’. Once they finally are sold, their selling price (less the cost) can be re-booked as revenue. 

So, keep that in mind when you review the abbreviated results here, or the detailed results here.

Aside from the footnote added to the accounting statements, we also feel it’s critical to remember this company is basically a re-invented company. A few weeks ago they made a major decision to drop utility boats (police, fire) and focus exclusively on performance boats. In our opinion it was a wise move, as that’s where they have an edge on the competition. However, we never thought it would be a perfect or easy transition. And, we don’t think anybody would say it has been. That’s just the way things are.

What’s interesting to us is how investors may be seeing a light at the end of the tunnel despite this quarter’s numbers. After sinking for the better part of the year, we’re finally seeing some interest in the stock. Granted, at only 4 cents, the limited risk may be part of the attraction. But, for the first time in weeks, we’re seeing some consistent activity above the 50 day moving average line. There still appears to be a cap at 4 cents, so some traders may want to see that nut cracked first before they decide to take the plunge.

Siena Technologies (OTCBB: SIEN) - the company we used to know as Network Installation - announced yesterday they had raked in $4.1 million in sales during their last quarter. Siena only posted $221,000 in sales during the same quarter (Q3) last year. Year-to-date, that brings the total revenue up to $15.9 million. Just for the sake of comparison, Siena only saw $5.9 million in revenue for all of last year. So yeah, the acquisition of Kelley Technologies seems to be working out pretty well.

Of course, the proof of the pudding is at the bottom line - earnings. How’d that go? Well, we think the company is on the right track. The quarterly net loss shrank to $627,000 - a vast improvement on the $1.9 million loss incurred for Q3 of 2005. The year-to-date (nine month) net loss is only $2.5 million….also a vast improvement on the $10.1 million dip into the red that Siena was sitting on at this time last year.

Our take? We think it’s an outstanding achievement. All too often we see a company make an acquisition which will add top line sales, but ends up expanding the bottom line loss (kind of like spending $2 to make $1). Not so with Siena. The Kelley acquisition has allowed this company to do more with less…relatively.

For complete details, click here.

As for the chart, from our point of view, the current trend is different than the rather bearish one we were facing last year and most of this year. Shares are back above the 50 day moving average line, and are also above a key long-term resistance line. And, this recent upward move follows the first instance in a long time where SIEN didn’t make a lower low. In August shares hit 20 cents before rallying back up to 50 cents. The following pullback only saw shares reach 25 cents before they started an apparent recovery effort. Getting past that recent peak of 50 cents is the next major milestone.

Ckrush Entertainment (OTCBB: CKRH) released their third-quarter results today, posting some rather hefty top line increases. Check it out….

Net revenues for the quarter ending on September 30th were a little more than $1.5 million…a big improvement over sales of $100,000 for the same quarter last year. For the first nine months of their fiscal year, the company has booked a little over $1.6 million in sales. Last year’s comparable nine-month period only saw $405,000 in revenue. Needless to say, it was a pretty good quarter as far as cash flow is concerned.

The bottom line figure - earnings - suffered however. This year’s quarterly loss of $4.7 million was significantly greater than the $1.6 million loss incurred for Q3 of 2005. A major increase in the cost of revenues, as well as much heavier administrative costs, set up the biggest portion of the dip into the red. The quarterly per-share loss went from 3 cents to 6 cents.

And what was the story behind the numbers? Our opinion is simple - they’re primarily reflective of the cost of starting a new venture. In the grand scheme of things, Ckrush and its divisions are new enterprises, and will need to lay out more cash than they take in to get off the ground. Of course, at some point they’ll need to earn more than they spend, so the question for investors is…..when is that point? We can’t answer the question with precision, but we think it’s still a little early in the game to expect monster-sized bottom lines from this young corporation.

To get specific, the big bump up in revenue was the result of a minimum guaranteed payment for releasing ‘Artie Lange’s Beer League’. The higher cost of revenue (an increase from $100,000 to $2.9 million) reflects expenses incurred in prior quarters for the filming of Beer League, but not yet charged….they were charged in Q3 instead. The additional $1.8 million in selling and administrative expenses mostly came from the cost of a stock compensation transaction.

Overall, no surprises really. The fact that the company was sitting on some expenses was already known, and the other film project - National Lampoon’s TV: The Movie - didn’t contribute to Q3 revenue. Plus, the LiveMansion.com movie project can’t bear fruit yet. Both films should eventually drive sales though….either theatrically, or via licensing (as will Beer League). So, it may be a little too soon to judge Ckrush on just these numbers. We’ll be very curious to see how things pan out once Beer League gets to DVD, once National Lampoon’s TV: The Movie gets to theaters, and once the LiveMansion film venture is completed.

For the full report, click here.

Earlier today, Web2 Corporation (OTCBB: WBTO) announced their 3rd quarter results. The company posted $180,000 in sales compared to $168,000 for the same quarter last year. The loss came in at $446,000 versus a $156,000 loss last year. The per-share loss was 2 cents for both quarters.

Where was the excess baggage? The cost of revenue basically doubled from $99,000 to $196,000, while the selling and administrative expenses were raised from $128,000 to $238,000. On a quarter-over-quarter basis, everything else looked mostly comparable.

As always, though, there’s far more to the story than just the numbers…..

If the term ‘Web1000′ is new to you, that’s probably going to change soon. Web2 recently acquired Web1000.com - an e-commerce website. The increase in the cost of revenue is largely attributable to that acquisition. Fortunately, Web1000 is a revenue-bearing enterprise, so the expense associated with buying it (cost of revenue) and running it (administrative exoenses) will presumably be offset by its sales going forward. To what degree they’ll be offset, we still don’t know for sure. But, we assume it will end up being an asset rather than a liability.

As for the big bucks supposed to be drummed up by the Chamber of E-Commerce and ByIndia.com, keep in mind these quarterly results were for the three months ending on September 30th. As of that time, only the Chamber of E-Commerce was ‘open for business’…..and it had only been live for 10 days.

Since then, the Chamber of E-Commerce has had some time to gain momentum, ByIndia.com has been launched, and there’s another division scheduled for its unveiling later this month. So, while their Q3 may have been basically flat, you have to keep in mind it should have been flat. We think the real test will be in seeing what kind of improvement they can make in Q4.

For the full results, click here. 

The re-introduction of Immune Response (OTCBB: IMNR) has created quite a buzz already! Below is a re-print of one of the e-mails we’ve received about the company’s potential….we figured rather than just keep the exchange bottled up between us and this reader, we could all benefit from sharing everyone’s thoughts.

SmallCap,

Like you, I’ve been following the Immune Response (OTCBB: IMNR) for many years. I was in the ‘02 private placement as well as the most recent private placement. I have a tremendous amount of the faith in Joe O’Neill and agree wholeheartedly with your thoughts regarding the prospects of the company.

However, I’m absolutely dumbfounded by the market cap. In my opinion, Joe O’Neill’s confidence in the science alone is worth $200 million. He’s the TOP AIDS guy in the country - if not the world! I simply don’t understand why investors are not buying this equity. I currently have 10 million shares. Keep up the great work and let’s get this company re-discovered…!

…

I simply don’t understand why anyone would be a seller at this point. Joe O’Neill has stated with great confidence that he strongly believes in the prospects of the company. Based on his guidance, why would one sell? Are there flaws in the company that I’m overlooking? Any thoughts you have would be appreciated.

All the best, EW

Hi EW.

In a nutshell, we’re with you. Some of the details you pointed out about the market cap and Dr. O’Neill were things we discussed in detail in the November 1st newsletter, so be sure to visit that link if you missed it the first time around.

Selling? While we agree that buying at these levels looks attractive, truth be told, there’s not necessarily a lot of selling going on right now….more like exchanging. Obviously for volume to increase four-fold last Wednesday as well as today there has to be somebody selling their shares. But, with the price holding steady, it looks like the buyers still far outnumber anybody looking to get rid of any IMNR shares they own. 

As far as flaws are concerned, we don’t necessarily see any ‘flaws’ per se. Yes, we’d love to see their two key therapies past Phase III testing, and we’d love to see the company sitting on a ton of cash. But, those aren’t flaws…..those are just realities. Although we’d be the first and last folks to point out the risk involved, we don’t necessarily see any hidden land mines in the way…this is a speculative company that appears to be on a promising track to treat HIV and MS. If either treatment gets approved, then the reward could be enormous. If not, the shares may not budge. That’s the name of the game. But no, no ‘flaws’ for anybody who understands all the pros and cons.

The only thing we thought might be a short-term hindrance was those 2 cent warrants that could nearly double the current float. If somebody was thinking that could cap the current (outstanding) shares, we wouldn’t argue the notion. Of course, the exception to the idea came to light today, when shares reached 2.2 cents. So much for the cap idea! That said, the warrants still may keep shares near 2 cents as long as they’re out there, although it still doesn’t mean the current trading level isn’t advantageous…..the 0.18 cent gain so far today is still a 9.38% gain. (Remember, it’s all relative.)

It’s almost become an epidemic…..in a good way. On The Go Technologies (OTCBB: ONGO) seems to be shipping out these big orders left and right. Today’s was good for $152,000 worth of hardware - an upgrade for a Canadian medical facility.

A good sale every now and then may seem a little uneventful, but there are two key realities to keep in mind. First, for On The Go, these big sales are more than occasional. Second, these aren’t just ‘big’ sales…they’re giant sales, relative to last year’s revenues. Let’s detail each idea…….

Just take a look at some of the big orders On The Go has filled recently:

• $134,000 on Nov, 1st
• $107,000 on Oct. 17th
• $75,000 on Oct. 13th 
• $170,000 on Oct. 12th
• $230,000 on Oct. 10th
• $200,000 on Oct. 9th
• $176,000 on Sep. 19th
• $300,000 on Aug. 10th
• $313,000 on July 19th
• $827,000 on June 15th

So no, it ain’t some crazy one-time deal.

The second thing to appreciate is just how ‘big’ these big sales are. For a General Electric (NYSE: GE) or a Microsoft (NASDAQ: MSFT), no, these wouldn’t be a big deal. But for On The Go, who pulled in $30 million in sales last year, each $100,000 sale represents 1/3 of 1% of last year’s total revenue (yes, that’s a lot for a company like On The Go). With those kinds of numbers being posted, we don’t think the company’s revenue goal of $40 million next year is out of the question. The strength of the current sales effort certainly looks as if they’re moving in the right direction.

By the way, if you missed Friday’s newsletter, you may want to go back an read our thoughts about ONGO shares.

For full details on today’s sale, click here.

Don’t forget, SmallCap Digest offers free stock ideas and market commentary through our e-newsletter. Be sure to sign up today using the link in the top right corner…and don’t forget to respond to the confirmation e-mail. Or, add us to your RSS feed using the link in the left-hand column.

Although slightly off our beaten path of ’strictly small cap’, we thought this observation could still possibly make you - or at least save you - some money…..we don’t think healthcare is such a great place to be right now.

It’s the sector lagging the most today, but a bird’s eye view of recent sector performance recognizes that’s not necessarily a new problem. This sector is also dragging the bottom in the 2-week and 1-month time frames. It’s only ahead of two other sectors (energy and utilities) in a 3-month timeframe, and is next to last in the 52-week performance column. You think it may be more than just a bad day? Yeah, we did too, and a chart of the S&P Healthcare Sector Index (HCX) verified our suspicions. Take a look.

On our scaled chart below - meaning a true ‘apples to apples’ percentage change comparison - the S&P Healthcare Index, in blue, lags the S&P 500, in red, for the entire year. The thing is, it’s not like the picture is getting any prettier….the SPX is venturing into new high territory, while the healthcare index wasn’t even able to not make a lower low (under November’s low of 383).

Some of the major names contributing to this weakness are Glaxosmithkline PLC (NYSE: GSK), MedcoHealth Solutions (NYSE: MHS), Alcon Inc. (NYSE: ACL), and Boston Scientific (NYSE: BSX).

One of the key exceptions to the general malaise in healthcare is biotech; those stocks appear to be having no problems advancing now, despite being particularly troubled in the early and mid-year periods. The Dow Jones Biotech Index (DJUSBT) may be stalling as it approaches new highs for the year (475), but the upside momentum still favors the bulls for now. Keep an eye on that potential resistance line t 475 though.

If you’re looking for a biotech opportunity, we think Multicell Technologies (OTCBB: MCET), Immune Response (OTCBB: IMNR), BioCurex (OTCBB: BOCX), and CEL-SCI (AMEX: CVM) are all worth a look. Amgen (NASDAQ: AMGN) and Gilead Sciences (NASDAQ: GILD) are a couple of bigger names that could be interesting.

Late yesterday, Immune Response (OTCBB: IMNR) announced the second set of warrants, issued through their latest round of financing, would be extended past their original expiration date of November 30th. The same warrants will now expire on March 1st, 2007.

And what better reason to add some detail to the deal, which we only got to touch on with our initial profile last week? Basically, this tranche of warrants - the second set established by the deal set up earlier in the year - could potentially inject $12,000,000 into the company’s operating fund via the sale of up to 600 million shares, at 2 cents each. Each share issued through the warrants would be a newly issued share, adding to the current float of about 850 million shares.

As for what it means to investors, in our opinion, it’s mostly a non-issue. Adding shares to the ones already outstanding seems like it could potentially dilute the current float (and in some ways it would), but considering anyone can buy shares on the open market for a little less than two cents, it doesn’t present any real burden on current owners. The upside for everyone, including current share-holders, is the cash. Given that Immune Response burns through about $1 million per month, the deal could actually fund the company for up to a year. And, that benefits everyone (and it was something that was going to have to happen sometime anyway). The only potential downside might be the notion of other open market buyers not wanting to act until the warrants aren’t hanging over their heads. But like we said, the financing has got to happen now or later. So, the issue is one of time much more than one of valuation.

Of course, we also have the advantage of knowing the time frames Immune Response has in mind with both of their key drug therapies currently in Phase II trials. They plan on ending Phase II and starting Phase III trial for both vaccines in 2008. If and when that happens, we can see the market’s interest in the opportunity growing exponentially, even though Phase III would take a few years to complete. Why? Remember, investors have historically ‘rewarded’ biotech milestones, knowing that the process of getting a drug to the market can take years. The potential payoff of any FDA approval is often well worth the risk of owning shares before Phase III is completed.

The point being, if things go well for either or both drugs in Phase II, and Phase III is started, we think getting new financing should be a relative piece if cake. But, they need some cash to get there from here. The company raised $18 million in March with warrants and convertible notes, and could potentially add another $12 million with the warrants that were prolonged today. That should keep the company afloat about long enough to get through Phase II trials, and get Phase III started.

The bottom line is simple though…in our opinion, this warrant extension doesn’t really materially change anything about this stock’s long-term potential. And as we discussed in today’s newsletter, 2 cents (or less) per share appears to be a risk-commensurate bargain for traders so inclined to take a swing.

While we try to avoid being an Op-Ed forum, except where it may pertain to our readers investing universe, there comes a time when you have to take a stand on issues worth fighting for. Hence, this blog entry….

As many of you may know, one of our profiled companies, CEL-SCI (AMEX: CVM), has developed an amazingly effective cancer treatment called Multikine. In Phase I and Phase II testing, the treatment has been proven to be very effective, with little to no side effect. In some cancer cases, such as head and neck cancer, Multikine was shown to be particularly effective….a point made even more poignant knowing there really is no other viable alternative to treat head and neck cancer. However, Multikine is known to be highly effective in fighting other cancers too.

Unfortunately, Multikine has yet to be approved for Phase III trials in the United States - the final phase in the FDA approval process. It has been waiting on Phase III approval for 22 months; there is no known reason for the delay. For perspective, the Canadian equivalent to the FDA approved Phase III trials just two months after filing the request.

The bottom lime is simple…U.S. cancer patients whose only hope may be Multikine are dying, having never even been able to attempt the experimental treatment. They’re dying while waiting on a bureaucracy to just allow a wider-scale, more in-depth version of Phase II trials.

While Phase III trials don’t necessarily guarantee a final FDA approval, the longer it takes to even start Phase III, the longer it will be before any final approval is granted. As we said, lives are being lost - perhaps needlessly - in the meantime.

There is something you can do.

The letter below explains this situation in detail. More specifically, it details how you can write in to the FDA Commissioner and urge a rapid decision on Phase III testing.

Whether or not you own, or plan to own, CEL-SCI shares is irrelevant. This isn’t about money. This is about medical progress that can possibly save lives….perhaps family members, perhaps yours.

Here’s the letter….. 

Subject: Why is the FDA not letting CEL-SCI move forward?

A very promising cancer therapy in late stage testing needs your help. Please write to the FDA (e-mail and mail address provided below):

A small US biotechnology company, CEL-SCI Corporation ( www.cel-sci.com ), has had a very promising cancer drug pending for a Phase III (final study) approval before the FDA for 22, yes you are reading correctly, 22 months. This same application was approved by the Canadian regulators in only 2 months. The Canadians and the FDA are supposed to use the same approval standards. What is the FDA doing? Please let the FDA know that this is not right. Cancer patients are dying while the FDA is delaying.

The Company has spent $90 million to develop this product called Multikine. The FDA has previously allowed studies with Multikine in head & neck cancer, prostate cancer, cervical dysplasia and HIV-infected patients, at a time when there was no safety data and no survival data. In these studies Multikine was shown to be very safe and in head & neck cancer it increased long-term survival by about 40%. Since the Company was allowed to study the product when there was no safety or survival data and the Canadian FDA has already approved the study, one has to wonder why the FDA is not moving ahead.

Let CEL-SCI run its Phase III clinical trial with Multikine and let the chips fall where they may!!!! If the drug turns out to be just half as good as it was in Phase II trials, it will be a breakthrough saving many lives.

The goal of Multikine is to make the first cancer treatment more successful. This means that Multikine would cure more patients with the first treatment. The Phase II clinical trial with Multikine showed about a 40% improvement in survival from Multikine. Anyone who has ever had cancer, or has a family member or friend with cancer, knows that recurrence of the cancer is bad, very bad. Multikine is designed to stop that recurrence.

Multikine cured 12% of head & neck cancer patients in 3 weeks, with no toxicity. Anyone who has ever seen the effects of radiation and chemotherapy can tell you how very amazing that is. On average Multikine killed 50% of the tumor cells in just a few weeks. It appears to enhance the killing of cancer cells with radiation and chemotherapy.

CEL-SCI�s results were published in leading peer-reviewed journals. The Canadians approved the Phase III study in 2 months. Why is the drug not allowed to move forward with excellent safety and promising efficacy data when it was allowed to move forward when there was no data? Is the drug, now that there is promising data, a threat to someone?

Please write to the FDA and let them know that you find this delay unacceptable. A safe cancer drug with promise should not be held up for politics. Too many people are dying of cancer every day. FDA finally has a new Commissioner, Dr. Andrew von Eschenbach. He probably does not even know about this travesty. Let him know and ask him to look into this. He can make a difference. Please contact him today.

Please write to the Commissioner as a concerned citizen and ask him to move CEL-SCI�s application along so that Multikine gets a chance to prove itself in Phase III studies.  Patients are dying and there is a drug that looks like it could help a good number of them. 

Office of the Commissioner, FDA
Parklawn Building HF-1
Room 1471
5600 Fishers Lane
Rockville, MD 20857