THE STEWART REPORT HOTLINE SUMMARY

Saturday, September 25, 2004

Next HotLine Recording Scheduled for Thursday, October 15, 2004

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Overview:

Push aside all the news of the election, oil prices, corporate earnings and the economy for a moment. Think "trading range."

Reuters Newsmail Editor Dick Satran said that yesterday regarding the general market, which has been stuck in an up-and-down, 10 percent range for the entire year. Looking backwards, it’s probably the narrowest trading channel in a generation. It’s a channel that’s been compressing price activity so tightly – and for such an extended period of time – that, when it finally breaks out, the move will have to be substantial. I’m betting that move will be to the upside – and that it’s no further away than the elections, which will ultimately serve as the trigger.

There’s lots of stuff Wall Street doesn’t like, but the one thing it really loathes is uncertainty. For now, the apparent closeness of the Presidential race is too much to bear. But, the moment the contest is decided, you can look for the market to rally – and rally hard – regardless of who wins.

As Dennis Miller is fond of saying, "That’s just my opinion. I could be wrong." As for a couple of earlier calls, we can see now I was reasonably right …

Emergency Filtration Products, Inc. (NASDAQ/BB: EMFP): 45 Cents

"I remember a time when this Company offered nothing but a mask for police and ambulance units – and the stock sold for 10 times today’s price. There was no nano-technology. No military interest. No war on terrorism. No filters for aircraft or government buildings.

"Now, at a fraction of its former price, with a highly marketable portfolio of in-demand products – really big demand, worth probably 100 times the current market cap of the security – this is a true steal. And forget about needing the patience of Job. The payday is at hand … BUY this thing with both fists."

That quote – or a rough approximation if it – was delivered in the August 16 HotLine, when EMFP was trading at 30 cents. Today, the stock is exactly 50 percent higher, trading huge volume, and acting like it wants to go higher still. And it will, once it breaks through the glass ceiling at the 50-cent level.

The latest move was prompted by the Sept. 14 news release announcing that EMFP had been awarded the government grant we’d hoped it would receive. That grant will fund the month-long testing process of EMFP’s nano-enhanced filter media – which, if successful, would equate to product sales to every branch of the U.S. military, worldwide. If the stock could move 50 percent on news of the test, can you imagine how high it might climb if the test is successful and the contracts are garnered? Everything we’ve seen thus far would be dwarfed by the revenues EMFP would be looking at before year-end.

And that’s just the half of it – i.e., the government half. I am still entirely confident commercial sales are also imminent. In fewer than five weeks (Oct. 29, to be exact), Itochu will be in Tucson, Arizona, to review the manufacturing facility. Between now and then, it wouldn’t surprise me in the least if Japanese government approval was secured, too. After all, our FDA approved the relationship months ago, and it’s difficult to imagine any nation with a similar agency more stringent than ours.

Once the formality of that approval is tendered, straight out of the gate we should see real contracts for huge money. Why? Because, as the world’s 11th largest company, really big dollars are the only dollars Itochu knows. Continue to BUY up to 50 cents, realizing that, once the notorious half-dollar barrier (to all penny stocks, not just EMFP) is surpassed, the stock will have another fast run.

Amarillo Biosciences (NASDAQ/BB: AMAR): 28 Cents

This is another situation where HotLine forecasts have played well in the market. The recent move from 22 cents to Friday’s closing price of 28 cents represented a 27 percent jump, but I fear many of you may have missed it.

On September 11, I suggested you "accumulate on weakness." Right call, wrong words: The stock was never weak. Instead, it just started inching upward, mostly in response to a small ,but meaningful news announcement three days later. It covered a sweetheart deal Dr. Cummins negotiated with NOBEL – a leading Turkish pharmaceutical maker – whereby Amarillo Biosciences licensed early rights to its low-dose interferon alpha for the treatment of Behcet’s disease in Turkey, as well as 18 other nations with a combined population of 365 million.

Although Behcet’s disease effects a very small percentage of the U.S. population, it is more than 600 times more prevalent in these other nations. That could equate to more than 100 million doses annually in Turkey alone. This would, of course, provide substantial revenues to AMAR. Better still, even though the agreement calls for NOBEL to cover all costs of the clinical trials, once FDA approval is obtained, it will be the property of AMAR. That’s the sweetheart part.

As I’ve reported numerous times, there are many near-term and long-term applications for Amarillo’s proprietary interferon – both for civilian medicine and in military applications to combat agro-terrorism. This stock is not a place for serious money. It’s anything but a blue chip. But it’s also anything but boring and remains my long-time, long-term, long-shot favorite to eventually surprise us with a lottery ticket-sized payoff. ACCUMULATE under 30 to 35 cents per share.

International Card Establishment, Inc. (NASDAQ/BB: ICRD): 54 cents

After months of non-stop news releases, acquisitions and all-around aggressive behavior, at this particular moment, I really have nothing new to report … but you can bet the Company does. Over the next few days, be sure to check the news – especially if you see the volume and/or the price begin to surge.

That’s because ICRD might offer up the name of either the "major restaurant chain" or "nationwide hospitality chain" its working with now that the NEOS acquisition is complete. As I said last time, both names are supposed to be big-time bell-ringers and can only lift the current share price, which I view as obscenely cheap. International Card Establishment is still our most intelligent and easily our most under-priced position at this time. BUY.

As always, thank you for listening – and for subscribing,

J. David Stewart

Analyst and Publisher, The Stewart Report