THE STEWART REPORT HOTLINE SUMMARY

Wednesday, December 21, 2005
(Next HotLine Planned for Monday, January 16, 2006)

Overview:
I think most of you would agree that, in recent HotLines, the “Overview” section has been as important as the individual stock updates themselves. Perhaps even more so. That’s because, for the past several months, our choice has been to view the pending “Bird Flu” pandemic from a wide angle. That only makes sense because, one way or another, major problems always equate to major opportunities.

To fully understand and appreciate these opportunities requires a “Big Picture” perspective. I think we have that. And, I also think we have a pair of micro-cap stocks that are perfectly positioned to help in the fight against this disease – and thereby profit from it. Greatly!

Enhancing the magnitude of this profit potential is the fact that the total value of our two companies is so grossly disproportionate to the total value of preventing the pandemic. Unbridled, the cost of H5N1 in human life will be counted in the millions. In terms of mere money, the direct impact of the disease on the global food, transportation and medicine sectors alone could easily exceed $1 trillion – with another $1 trillion just as easily thrown in for collateral damage.

Those numbers are Goliath – but they’re not mine. Actually, they’re an amalgamation of figures from a continual news feed that’s culled from media around the world each day – hour to hour – by a non-profit website called iFlu.org. In turn, we here at The Stewart Report have worked to group the known information country by country and industry by industry. I can’t say that we’ve entirely succeeded in that effort – but we certainly haven’t totally failed, either.

The problem in accurately assessing our success or failure is that the numbers are simply too large … too weird. Frankly, if the button-downs at IBM were to unleash Big Blue on the subject, even it would likely blow a fuse, or pop a semiconductor or fry whatever it is that chokes modern super-computers. However, one thing is certain: The more we learn about H5N1, the more we appreciate the two Stewart stocks that very directly correlate to the pandemic.

Ostensibly, Emergency Filtration Products, Inc. (NASDAQ/BB: 72 cents), is the better of the two. After all, it’s the one with nano-mask orders flooding in as fast as – if not faster than – it can make the things. Revenues are going through the roof, share-volume stats are completely off the charts and, in between healthy breathers to shake out short-term profit poachers, the stock continues to climb ever higher.

Ironically, the only thing impeding EMFP’s progress is the progress itself, as well as all the publicity it has generated.

Monday night, I spoke with founding CEO Doug Beplate from 10 p.m. until 11:15 p.m. He was still at his office, so busy this was the only time he could schedule a talk with me – and, keep in mind, this guy is my friend. Also worth noting, three of our five previous conversations were interrupted by local Las Vegas film crews from the three major network affiliates – ABC, CBS and NBC.

In addition, Doug had a lengthy interview last month on National Public Radio – and, if the chat boards are correct, his nano-mask was specifically referred to several times Monday night on a two-part CNN show called “World Chronicle.” The CNN host was Tony Jenkins, and his guest was Dr. David Nabarro, the Senior United Nations System Coordinator for Avian and Human Influenza. One helluva title – and it was probably one heck of a show. Neither Doug nor I saw it, but we were both watching the posts at RagingBull.com while we spoke and one thing was certain: The term “nano-mask” was mentioned many, many times.

Perhaps that’s why EMFP was up yesterday … again. And on huge volume … again.

But, even as I say this, I remember now that EMFP was up only a couple of cents on approximately 260,000 shares at 10 a.m. Pacific Standard Time. Circa 12:45 p.m., the Company released the following news announcement:

“Emergency Filtration Products, Inc., announced today that it has entered into distribution agreements with nine international distributors operating in … Australia, Canada, Denmark, New Zealand, Pakistan, South Africa, South Korea, Sweden and Thailand. The Company is also at an advanced stage of negotiations to sign additional distributors in a number of other countries.

“The international distributors signed to date have agreed to order a minimum of 550,000 Nano-Masks and 7,250,000 Nano-Mask filters over the next two years. The current delivery schedule – which is based on the Company’s production capacity – calls for approximately 225,000 Nano-Masks and 3,000,000 Nano-Mask filters to be delivered in equal allotments over the course of 2006. In 2007, deliveries to these distributors are currently scheduled to reach 325,000 Nano-Masks and 4,250,000 Nano-Mask filters.”

The release went on for a few more paragraphs, but the gist of it was that EMFP is now positioned to sell every mask and filter it can possibly produce over the next few years – and, if it can increase production capacity further, it will be able to instantly sell those masks and filters, too.

This leads me to believe that the CNN show provided only half the impetus for Tuesday’s market action because, by the closing bell, Emergency Filtration Products, Inc., had risen twice as much on two-thirds again as much volume. The day’s final per-share gain was five cents, a jump of roughly 7.5 percent, and the total volume was 461,000 shares – more than the stock was trading in a month this time last year.

Merry Christmas, EMFP shareholders, one and all!

You will please ignore that last sentence. I, same as you, feel a certain obligation to spread a little holiday cheer here and there – even if it is against a canvas that covers all seven continents with a subject that, for many, has already spelled Black Death.

Earlier in this HotLine, you’ll recall my mention of iFlu.org and the hundreds and hundreds of headline stories we’ve attempted to categorize and give financial meaning to. Earlier still was a long, crisp, electronic moment that you don’t know about, but that I’ll need a month or so to forget. It was the moment when my MS Word program crashed and I lost this entire HotLine – a moment that required the subsequent sacrifice of my computer keyboard, summarily executed in a flash of fury by repeated strokes from my seven iron.

When the bits of plastic and circuitry settled to the carpet, my mind rested on the sad reality that this particular HotLine would have to be recreated, entirely from scratch, with little more than pen and ink and the stupid hope that I possessed a photographic memory – which I don’t! On the bright side, however, I do remember a direct quote from a French newspaper, which yesterday revised its expectation of human Bird Flu deaths in that nation downward to just 80,000. And, I still have before me the hard copy of the Page 1, Column 1 story from last Tuesday’s L.A. Times. The subhead reads: “Biosecurity and Locked Gates Are a Fact of Life at California’s Chicken Farms, Where a Single Case of Bird Flu Could Trigger a Catastrophe.”

So, I called Larry D. Spears, the former managing editor of The Los Angeles Times Syndicate, who is now the very senior editor of The Stewart Report. I asked him to go to iFlu.org and provide me – so that I could provide you – with 12 tip-of-the-iceberg headlines from 12 different news sources around the globe over just as many days. Sadly, it didn’t take him long. Here’s what he faxed back:

11-30-05 – BEIJING (AP) – China's health minister defended the government on Wednesday against accusations of a cover-up of human infections of bird flu, but said ill-equipped and ill-trained doctors might be unable to detect cases.

12-02-05 – Survey show US companies ill-prepared for bird flu attack (The Star Online)
WASHINGTON: If a super-flu sweeps the globe, who will haul away the garbage? Keep the factories running, make cars and computers and tissues? Stock and sell groceries? Keep electricity flowing?

12-04-05 – Bird Flu Hype Infecting Biotech Industry, Has Overtaken SARS As No. 1 Feared Global Death Threat (ABC News).

12-05-05 – WASHINGTON – Many state government and medical officials are now complaining that they don't have the money to adequately prepare for a possible bird flu pandemic. (WebMD)

12-08-05 – Bird flu could cost U.S. economy $675 billion. Study says 30% of the population could be out of work for three weeks, 2.5% of those could die. (CNN Money)

12-09-05 – Zimbabwe’s health authorities, who have been on high alert for bird flu since October, had their worst fears confirmed when two farms reported outbreaks in the south of the country this week. (London Mail and Guardian)

12-11-05 – (Bloomberg) – Japan will probably pledge $135 million Monday to help Thailand, Indonesia and other Southeast Asian countries prepare for a possible bird flu pandemic, the Ministry of Foreign Affairs said.

12-12-05 – JAKARTA – A 35-year-old Indonesian man who died last month has been confirmed by World Health Organization (WHO) tests as being the country’s ninth bird flu victim, Health Minister Siti Fadillah Supari said Monday. (NBC News)

12-13-05 – New Zealand Ministry of Civil Defence and Emergency Management readiness manager Mike O'Leary said a bird flu pandemic could strike in multiple waves, lasting up to six months. "Three waves of approximately eight weeks each is what we are planning for," Mr O'Leary said. (Human Resources magazine)

12-14-05 – KIEV – Bird flu, including the H5N1 strain dangerous to humans, has spread to 11 new villages in Ukraine's Crimea peninsula, officials said on Wednesday. (Fox News)

12-15-05 – BUCHAREST (Reuters) – Romania confirmed cases of deadly avian flu in birds in five more villages in and around the Danube delta on Thursday and warned migratory flocks could carry the virus south to neighbouring Bulgaria.

12-18-05 – SAN FRANCISCO – U.S. federal officials seized 51 shipments of counterfeit anti-bird flu drug that had been shipped to an airmail facility from Asia to San Francisco. Each of the boxes contained 10 to 50 individual pills and had been purchased through Internet sites for personal use, KRON TV, San Francisco, reported. (FreeMarketNews.com)

Believe me, there is no joy, nor pride of authorship, in reporting to you what’s being reported around the world… This is not “The Twelve Days of Christmas” that any of us wants to hear recited. It’s not the “Winter Wonderland” that Currier & Ives would want to paint, nor the “White Christmas” that Bing Crosby would have liked to sing. Not now. Not during the holidays. But we’re all adults – and we’re all investors. Regardless of the season, we can’t echo John Kaye when he mockingly wrote in the late ’60s, “Let’s just stick our heads into the sand, just pretend that all is grand and hope that everything turns out okay.”

If you’re not familiar, that lyric referenced the Vietnam War – a thin analogy to the last time mankind faced a plague of the magnitude it faces now, which was back in 1918, during World War I. It’s a matter of historical record that millions more people died from that era’s Spanish Flu than were killed in the global conflict…

That’s a hard-core fact … One that I originally dismissed because of the enormous advances since made in medicine, pharmacology and health care methodology. But, ironically, during the same 87-year time span, there have been equal, if not greater advances in man’s ability to cross borders, by the millions, at speeds approaching Mach One. Clearly, the modern-day odds of cross-border contamination favor disease, not man.

Indeed, I see only three constants in play here – and not one of them is to man’s advantage:

• No disease has ever been completely eradicated. Not polio, not cholera, not even the Biblical likes of leprosy.


• Most diseases have an inexplicable power to “learn.” They adapt; they mutate; they replicate; they migrate.


• Birds will always migrate, too. Avian influenza, as the name implies, is carried by birds – and birds don’t carry passports.

If I were to list a fourth constant, it would be my unwavering belief in Dr. Joseph Cummins, his groundbreaking research into oral interferon, the $37 million that’s been invested into that research by smaller players, such as myself – and you – and by some really big players, like Hayashibara Corp., a privately held $6 billion Japanese pharmaceutical company and the largest shareholder in Amarillo Biosciences, Inc. (NASDAQ/BB – AMAR: 46 cents).

There’s good reason for my faith in Dr. Cummins and interferon’s potential. After all, interferon has a clinically proven ability to “interfere” with influenza in bird eggs. That’s a certainty. In fact, the only thing that has not been proven is oral interferon’s specific ability to interfere with this strain of the Bird Flu itself. Then again, the same thing can be said of “Tamiflu,” which is probably the only Bird Flu “product” currently on the market that’s even more back-ordered than EMFP’s nano-masks!

Seriously, as unproven as Tamiflu might be, the small hope that it could help protect against H5N1 has generated so much demand that, according to CNN’s Headline News (as verified by the last item on Larry’s list above), the product is being counterfeited in China, sold on the Internet and confiscated daily by U.S. Customs officers, who warn that the fakes “contain not one single element of the actual drug itself.”

So, I look at the pent-up demand for Tamiflu’s biopharmaceutical. Then I look at the enormous logic behind Amarillo’s heavily patented oral interferon technology. It does not require refrigeration. You don’t need a syringe to administer it. It has the shelf-life of a Beatles album. It’s affordable by the standards of even the poorest of nations – which are likely to be the nations that need it the most. And, finally, due to AMAR’s decade-long agreement with giant Hayashibara, the world’s manufacturing needs might actually be achievable. This can be said of no other Bird-Flu related biopharmaceutical I’m aware of.

And these are just some of my considerations. There are also other points of interest. I have friends who sit at trading desks for brokerage firms now telling me there is large and inexplicable buying interest in Amarillo coming from Germany. They tell me this has been a significant factor in recent volume – and that volume has been huge compared to AMAR’s past history.

Like I said before, the enormity of this is too much for me to comprehend. Most things are. That’s why, long ago, I learned how to boil things down – how to reduce them to simple, common-sense terms.

Today, even with the share price nearly twice what it was a year ago, my common sense tells me I have a 20-year-old publicly traded Company with a total market cap of just $8.5 million and totally logical access to a trillion-dollar situation. Hands down, that means AMAR is still the best speculative BUY I’ve seen in ages.

Along those lines, I have one final note: Today (which has long since turned into yesterday), I bought 25,000 shares of International Card Establishment, Inc. (NASDAQ/BB: ICRD – 17 cents). I paid the offering price – and I was glad to do so.

With a 52-week low of 14 cents and a 52-week high of 58 cents, my 17-cent purchase will be looking real pretty as early as January 2, when the tax sellers are finally gone. Soon thereafter, the highly erroneous nine-month numbers published by some outfit called “EDGAR online” will be re-stated. Bottom line, by Valentine’s Day, I expect a 30 percent profit at the least.

And, why shouldn’t I? After all, at today’s prices, the stock is selling for less than one-quarter sales in an industry where all others sell for a ratio of at least 1:1.

Do remember, however, that this is the very definition of a “limited-time offer.” Said offer will expire the same day that the current trading year expires – when the phenomena of “tax selling” will expire as well. In other words, you have until Dec. 30 to follow my example and BUY additional shares of International Card Establishment, Inc.

Thank you for listening, and have the happiest of holidays – whichever one you choose to celebrate. (I won’t wish you a prosperous New Year because, if you own all three Stewart stocks, that should be a given.)

J. David Stewart
Analyst and Publisher, The Stewart Report

Note: David’s HotLines are also available by dialing (949) 583-6057, and entering
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Information contained herein has been obtained from sources believed to be reliable, but there is no guarantee as to completeness or accuracy. Any opinions expressed herein are statements of our judgment on this date and are subject to change without notice. Acting as an investor, and also as a consultant to the Company, David Stewart purchased 100,000 shares of Amarillo Biosciences, restricted under Rule 144, and also owns shares in Emergency Filtration Products, Inc. Affiliates of The Stewart Report may also have additional long or short positions in these and other securities discussed herein, including warrants and/or options, and may buy or sell same at their own discretion. This report contains or may contain forward-looking statements within the meaning of the "safe-harbor" provisions of the US Private Securities Litigation Reform Act of 1995. This report is intended for informational purposes only and does not have regard for or take into consideration the reader's investment objective, financial situation or suitability for this security. Consult with your financial advisor and perform your own due diligence. Copyright © The Stewart Report, 2005.