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Hello Readers,
Despite the great market upturn last week, we are still somewhat skittish, because the underlying factors that caused the Fall carnage are still there. Much plowing remains on the mortgage front and let’s not forget about oil, hovering around $90 bbl. Now, having said that, we are still bullish for the long-term. What concerns us is that a lot of technical damage has been done, especially to small stocks, and that isn’t going to be repaired overnight. Also, investor confidence is chilly, to say the least. Our own Current Portfolio hasn’t seen this much red ink since Fall, 2001, right after 9/11.
So, is this a good time to bottom fish? Maybe, but you will need patience and learn to expect the unexpected. Once again, many of our picks had some good to great news over the last few months, only to see their stock prices mark time.
Here are the headlines since the last Newsletter about companies in the Current Portfolio. Dates in parentheses are when we first recommended them.
Continucare(CNU)(11/20/07). To present at BMO Capital healthcare conference on December 5.
Linktone(LTON)(11/5/07). This one had dropped over 35% since we picked it, but some really great news pushed it back to current levels, which, in this market, has been rare. First, the company came out with some pretty good quarterly numbers and the balance sheet still looks strong. Then, an Indonesian media company announced it was buying 51% of LTON’s outstanding shares.
Sunesis Pharma(SNSS)(11/5/07). To present data on two product candidates at 49th meeting of Hematology Society on December 10.
Retractable Technologies(RVP)(10/20/07). Recent numbers show continued revenue growth; balance sheet still looks pretty healthy.
XATA Corp(XATA)(9/20/07). Quarterly and end of FY numbers not great, but XATANET sales grew 39%; balance sheet still looks good.
Wave Systems(WAVX)(9/5/07). Expands enterprise security coverage in Asia Pacific with frontline technologies.
Pharmacyclics(PCYC)(6/20/07). To present on its BTK and HDAC inhibitors at 49th Hematology Society confab between December 8-11.
Alphatec(ATEC)(6/20/07). To present at the BMO Capital conference on December 4 and at the RBC confab on December 12. Receives FDA 510(k) clearance for the ZODIAC LUXE 4.0 millimeter diameter pedicle screw.
Oncolytics Biotech(ONCY)(6/5/07). To present at annual vaccine production conference on December 5. Receives 24th U.S. patent.
Hana Biosciences(HNAB)(5/5/07). To present Marqibo data at 49th Hematology Society meeting. Initiates Marqibo Phase 2 clinical trial in metastatic malignant Uveal Melanoma.
ECTel(ECTX)(5/5/07). Golden Telecom selects company’s fraud management solution to reduce fraud losses. Unveils four new products at its Global Community Meeting.
Gene Logic(GLGC)(4/20/07). Receives milestone payment from Pfizer for filing tumor drug patent application.
VocalTec(VOCL)(4/20/07) 3rdQT results below target; balance sheet still looks good.
Immunicon(IMMC)(3/20/07). Company’s CellSearch circulating tumor cell kit receives FDA clearance for monitoring patients with metastatic colorectal cancer. Gets non-compliance notice from NASDAQ; this is making us nervous.
TTI Telecom(TTIL)(3/5/07). Receives $1.5 million order from a U.S. system integrator.
Endologix(ELGX)(1/20/07). Presents favorable Powerlink System clinical data at 2007 VEITH Symposium.
Neose Technologies(NTEC)(12/20/06). To present data on GlycoPEGylated Factor Vlla at annual Hematology Society meeting.
Proxim Wireless(PRXM)(11/5/06). Extends QuickBridge product line with new QuickBridge 60250.
Hydrogenics(HYGS)(9/20/06). Receives $1.7 million order for three fuel cell hybrid MidiBuses. Cuts 50 more jobs to reduce costs.
Advanced Life Sciences(ADLS)(7/20/06). Stock gets a “buy” rating from Lazard Capital Markets with a target of $6. Hey! Sounds good to us!
TRI-S Security(TRIS)(5/5/06). Subsidiary awarded six new contracts estimated at $1.75 million annually. Also gets new $1.7 million contract with Miami-Dade County (GSA). Names new CFO.
Lipid Sciences(LIPD)(2/20/06). Gets non-compliance letter from NASDAQ. Not making us nervous just yet, but a little worried.
8×8(EGHT)(1/20/06). Packet8 MobileTalk international calling service now compatible with nearly 450 mobile phones. Signs distribution agreement with SYNNEX to offer Packet8 virtual office hosted iPBX services. Launches mobile VoIP overseas calling service.
Digital Angel(DOC)(12/20/05). As we have said, periodically, this one has been a major disappointment. Once again, the company has upbeat news and the stock continues to go down. Maybe, just maybe, things will get better after the merger with sister subsidiary Applied Digital. Who knows.
RAE Systems(RAE)(10/5/05). Introduces MiniRae Lite photoionization detector for volatile organic compounds.
B.O.S.(BOSC)(1/5/05). Closes the Summit transaction. Quarterly results so-so; balance sheet still looks okay.
Aviza Technology(AVZA)(10/5/04). Stock takes a hit as quarterly results disappoint; balance sheet still looks good. Receives order for Celsior fxP ALD system from Japanese logic IC manufacturer.
Our picks for this Newsletter are a tire maker (yes, you read that right) listed on NASDAQ, and a AMEX-listed social networking company.
AMERITYRE CORPORATION (NASDAQ: AMTY) – $2.23. Twelve-month hi-low has been $5.40 – $2.05. Based in Boulder City, NV, with about 25 employees, this tire maker has 23.4 million shares outstanding, $5.95 million in total current assets, $7.68 million in total assets, little debt, and $288,000 in total liabilities. Institutional ownership is negligible. www.amerityre.com
We know. Ho-hum and boring, but Amerityre Corporation has some nifty technology that it is trying to take to the next level. Also, for a company its size, the balance sheet isn’t bad. And Lee Iacocca has something to do with them.
Founded in 1995 as American Tire and trading on NASDAQ for less than two years, Amerityre has developed and distributes Flatfree polyurethane foam tires for bicycles, wheelbarrows, wheelchairs, golf carts, hand trucks, and lawnmowers. The company is also developing polyurethane elastomer tires for heavy-use applications. Amerityre’s proprietary polyurethane material technology is based on two formulations, which include the closed cell polyurethane foam, a lightweight material with high load bearing capabilities for light-use applications; and Elastothane, a polyurethane elastomer with high load capabilities suitable for heavy-use applications.
Now, about that next level. It has to do with Amerityre’s Arcus run-flat pneumatic passenger car tire design. The Arcus is a patented system designed to operate at normal air pressure, yet continue to perform normally for at least 200 miles without air. The company claims that independent testing has demonstrated that the Arcus has 45% less rolling resistance than a comparable rubber run-flat car tire, resulting in more than 12% increase in fuel economy.
In early November, the Arcus successfully completed all testing requirements under Federal Motor Vehicle Safety Standard (FMVSS) 139. The company CEO says this has put them in a position to begin substantive discussions with companies that have expressed an interest in licensing the technology and to provide them with sample tires. Amerityre estimates that the capital investment required for a potential manufacturer to produce one polyurethane passenger car tire per minute will be less than $10 million. This amount is one-sixth to one-eighth the cost of an equivalent rubber passenger car tire manufacturing line, according to AMTY.
For the FY ending 6/30/07, revenue was $3.42 million with just over $5 million in losses. During the 1stQT of the current FY, ending 9/30/07, revenue was $663,000 with $1.1 million in losses.
Should the company be able to license the Arcus passenger tire technology, then we may see a nice move in the stock.
Our 24-month target for the stock is $3.75 to $4.25.
For more information, contact AMTY at 800-808-1268; information@amerityre.com
DIGITAL FX INTERNATIONAL, INC. (AMEX: DXN) – $2.58. Twelve-month hi-low has been $9.50 – $1.85. Located in Las Vegas, NV, with about 50 employees, this social networking company has 24.2 million shares outstanding, $4.78 million in total current assets, $9.14 million in total assets, little debt, and $3.56 million in total current liabilities. Institutional ownership is negligible. www.DigitalFX.com
YouTube. MySpace. There should be room for another and another as we add DigitalFX International, Inc. to the Current Portfolio. The balance sheet could be a little stronger, but the company has been showing pretty decent year-over-revenue growth.
Public for a little over a year, DigitalFX is a digital communications and social networking company. Its products include Video Mail, a web-based email client with streaming media options that allow users to create or reply with embedded video messages; Video IM, a video-enabled instant messenger tool, which allows users to send real-time streaming video to anyone that has agreed to join their contact list; Live Webcasting that allows a user to broadcast live over the Internet to a number of simultaneous viewers; Podcasting, which enables video recordings to be available for downloading and subscriptions by others; Blogging, which allows the creation of an online video diary; and a line of video tutorials.
DigitalFX also hosts and markets HELLOWorld.com, a web portal that provides subscribers, ranging from age 16 to 65, with a spectrum of streaming video content, as well as an integrated suite of consumer-oriented streaming media applications, including video email, video chat, and live Web-casting; and offer Web 2.0 communication tools that enable users to create, transcode, send, manage, and store various form of digital media content. The company sells subscriptions to its portal through a multi-tiered affiliate program as well as directly to retail customers in the U.S., Canada, the U.K., Mexico, Australia, and New Zealand.
In mid-November, DigitalFX launched helloPhone, a video phone service at no cost with unlimited in-network calling to all of its more than 30,000 HELLOWorld subscribers. The company’s strategic partner in this is Fusion Telecommunications, a one-time successful pick of ours. Also, at that time, DigitalFX came out with some interesting year-over-year numbers that show the customer base increased 34% to 30,375; its active affiliate base increased 12% to over 15,000; recurring revenue from all customers increased 30%; revenue increased 11% to $18 million; and recurring revenue increased 84% to $12.9 million. Yes, there were a few negative numbers, but the positives seem to outweigh them.
For FY2006, ending 12/31/06, revenue was $22.8 million with $480,000 in net income. During the first nine months of the current FY, ending 9/30/07, revenue was $17.98 million with $971,000 in losses; all the losses came in the last quarter and a lot of it was attributed to new product development.
Social networking is what the Net is really all about, and, as we alluded above, there will always be room for one more, and DigitalFX appears to be carving out a nice piece for itself.
Our 24-month target for the stock is $4.75 to $5.00.
For more information, contact DXN’s Lorne Walker at 702-506-0779; lorne@digitalfx.com
Look for the December 20, 2007 Newsletter to be posted on December 17 or 18.
Thank you,
George