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Hello Readers,

Since the last Newsletter, we closed one position for a pretty nice gain.

ART TECHNOLOGY (8/5/03). Closed position 3/10/06 at $3.43 for a 67% GAIN.

Until we closed it, Art Technology had been our second oldest open position, one that we held onto even when the stock sank to around a dollar. We kept it for the simple reason that it usually maintained a pretty good balance sheet. However, we suspect that because of the volume, fundamentals did not have much to do with the stock’s recent surge; it was probably a favorite among some momentum players.

The first part of March was pretty choppy for the markets, as we feared it would be in the last issue. We’ve heard all sorts of reasons as to why, such as the Iranian nuclear controversy, higher oil prices, and higher interest rates looming over the horizon. But, it could have been some good old fashioned profit taking. However, we suspect that the main pall currently hanging over the market is a lack of confidence in our national leadership, on both sides of the aisle.

Here are the headlines since the last Newsletter about companies in our Current Portfolio. Dates in parentheses are when we first recommended them.

Lipid Sciences (LIPD) (2/20/06). Balance sheet still seems pretty healthy at year end.

Adherex (ADH) (2/20/06). Expands Phase 2 ADH-1 trial to include three more Canadian sites. And, no, we don’t have any explanation as to what has caused the stock’s recent drop.

Gateway (GTW) (2/5/06). About 20 to 25 various stories about the company restating 2005 profits lower and the settlement of a patent suit with HP. Despite it all, stock price is about where it was at several weeks ago.

8X8 (EGHT) (1/20/06). Partners with Legerity to offer turnkey phone-ready PC solution.

Dynacq Healthcare (DYII) (1/20/06). Announces termination of agreement to sell its Baton Rouge Hospital assets.

Ceragon Networks (CRNT) (1/5/06). Expands FibeAir 1500P native IP capabilities with fast ethernet 50-400 mbps full duplex transmission. Don’t you just love it when things are explained with such clarity?

Digital Angel (DOC) (12/20/05). Awarded $900,000 U.S. government contract. Fourth quarter/year-end numbers look okay, as does balance sheet. Inks distribution pact with U.K. livestock tagging company. CEO was slated to appear on CNBC’s Squawk Box on 3/15, the day before we posted this Newsletter.

AuthentiDate (ADAT) (12/20/05). As we write this, stock has pierced our 50%-plus threshold, so, we will be closing it any day now.

Fusion Telecom (FSN) (12/5/05). To release 4th QT/FY results on March 31. Partners with AnchorFree to market VoIP services to users of large Wi-Fi network.

Westell (WSTL) (10/20/05). Announces new line of broadband MediaStations for network operators and content providers. Subsidiary adds new Affinity program partners.

Nephros (NEP) (9/20/05). Names new CFO.

EntreMed (ENMD) (9/5/05). Releases year-end numbers and will give a 4th QT update on March 22.

N.A. Scientific (NASI) (8/5/05). 4th QT results a mixed bag; balance sheet could be a little better.

Innodata (INOD) (7/5/05). Year-end /4th QT numbers not great; balance sheet still looks pretty good.

Telecommunication Systems (TSYS) (6/20/05). Completes $10 million private placement debt financing. Partners with Rand McNally to offer StreetFinder Wireless. Aids Philippine disaster effort with SwiftLink. Awarded patent for Web browsing over non-IP based networks. Partners with Convergence to offer VoIP E9-1-1 service to enterprise market.

Commerce Energy (EGR) (6/5/05). Releases quarterly numbers. Reports receipt of demand for arbitration from CAN.

Applied Mico Circuits (AMCC) (11/20/04). Gets some nice mentions at The About half a dozen product releases.

Aviza Technology (AVZA) (10/5/04). Receives order for AVP Systems from Silterra Malaysia.

Chordiant (CHRD) (9/20/04). Names new CFO. To optimize customer experience management at AOL. To present at B. Riley confab March 16, the day this Newsletter is posted.

AIXTRON (AIXG) (7/5/04). Releases 4th QT/FY numbers, which are so-so. Receives multiple order from new LED giant.

Network Engines (NENG) (6/5/04). Signs SecureData as new distributor in southern Africa. Delivers integrated web security to SMB market. NENG and Stromboli deploy NS6300 security appliance at Objective Productions. Signs BUI to expand market reach.

Socket Communications (SCKT) (3/20/04). Collaborates with Zoran on portable media player reference design. Awarded U.S. patent for handling expansion card and module “card information structure”. Several other news releases about products.

OpenTV (OPTV) (3/20/04). Builds application for new CNN interactive TV launch. Posts some pretty good 4th QT numbers, balance sheet still looks strong.

Actuate (ACTU) (1/5/04). Company and IBM deliver flexible approach to service oriented architecture. Bombardier Aerospace picks ACTU’s performancesoft pbviews. To present at B.Riley confab on March 16, the day this is posted.

AVANT Immuno (AVAN) (12/5/03). Year-end balance sheet still looks to be half decent. Accelerates receipt of $40 million milestone payment for Rotarix.

Insmed (INSM) (11/5/03). Prices 20 million share offering at $2/share, which apparently did not help the stock, but the company garnered $42.8 million. Year-end balance sheet still looks to be pretty healthy.

Our picks for this issue are a biotech that we danced with many years ago and that was good to us, so, we thought that maybe we could have a repeat; and the other pick is an electronics maker that is sort of ho-hum but it has been making money.

CYTOGEN CORPORATION (NASDAQ: CYTO) – $3.40. Twelve-month hi-low has been $6.76 – $2.71. Based in Princeton, NJ, with about 85 employees, this biotech has 18.7 million shares outstanding, $30.33 million in cash/equivalents, $44.79 million in total assets, little debt, and $7.21 million in total liabilities. Institutional ownership is around 40%. One analyst gives the stock a “strong buy” and another has it as a “moderate buy”.

This is the first time in our nearly ten-year history that we are walking down the same road twice. We first recommended Cytogen Corporation in January, 1998, at $2.12 and closed it two years later, in January, 2000, at $4.62; very shortly thereafter the stock traded between $150 to $165, which, of course occurred in the heady days of 2000. Over the last year, CYTO has had some stumbles, such as an FDA roadblock on one of its products, and it issued a poor sales forecast at the end of the 3rdQT FY2005. We feel that most of the bad news may be behind the company, and that CYTO could se another incarnation; however, we’re not looking for the record highs to be broken.

Founded in 1980 and public for over 15 years, Cytogen, which is oncology-focused, develops therapeutic and molecular imaging/diagnostic products. The company’s primary marketed products are Quadramet and Protascint. Quadramet is a samarium SM-153 lexidronam injection for relieving pain due to metastatic bone disease arising from prostate, breast, multiple myeloma, and other types of cancer. Prostacint is a capromab pendetide kit used for preparing Indium In-111 capromab pendetide, a monoclonal antibody-based agent targeting PSMA (prostate-specific membrane antigen) to image the extent of prostate cancer. CYTO also has the marketing rights to Combidex, an imaging agent.

Cytogen’s product candidates include rs PSMA protein vaccine, an in vivo vaccine consisting of recombinant soluble PSMA combined with an immune stimulant to induce an immune response; PSMA viral vector vaccine, an in vivo vaccine that uses viral vectors designed to deliver the PSMA gene to immune system cells in order to generate potent and specific immune response; and PSMA monoclonal antibodies that bind the 3-D structure of PSMA on cancer cells, including naked, toxin-linked, and radio-labeled approaches.

At the end of February, CYTO announced that a study showed Quadramet helps lower PSA, a prostate cancer indicator. In the beginning of that month, the company and Savient Pharmaceuticals said they planned to enter negotiations that would grant Cytogen marketing rights to Savient’s Soltamox, a cytostatic estrogen receptor antagonist. In January, Cytogen slapped a lawsuit against Advanced Magnetics over the licensing deal for Combidex.

For FY2005, ending 12/31/05, revenues were $15.75 million with $26.29 million in net losses compared to FY2004 revenues of $14.48 million and $20.54 million in losses. Throughout its history, Cytogen’s stock movements have taken some wild rollercoaster rides. At the moment, the stock seems to be at the lower end of a dip.

Our 24-month target for the stock is $5.75 to $6.25.

For more information, contact CYTO at 609-750-8200;

TII NETWORK TECHNOLOGIES, INC. (NASDAQ: TIII) – $2.35. Twelve-month hi-low has been $4.10 – $1.16. Located in Copiague, NY, with about 80 employees, this electronics maker has 12.2 million shares outstanding, $18.11 in total current assets, $22.38 million in total assets, little debt, and $3.98 million in total liabilities. Institutional ownership is around 16%.

Sometimes we pick a company that is totally non-sexy, but has a decent balance sheet and (surprise, surprise) has been making money. Such is the case with TII Network Technologies, Inc. For the last two years, TIII has been profitable and could do a 3peat. Note that the company is changing its FY from July to January.

Founded in 1964 and public since 1992, TIII designs and markets lightning and surge protection products, network interface devices, and station electronic and VoIP enclosure products. Its lightning and surge protection products include gas tubes, modular station protectors, broadband coaxial protectors, solid state and hybrid modular station protectors, AC powerline protectors, AC powerline/dataline protectors, and network interface devices, all of which are primarily used on home or business phone lines. The company’s network interface devices house the FCC-mandated demarcation point between telephone operating companies-owned and subscriber-owned property.

TIII’s station electronic products are installed with network interface devices and allow a telephone operating company to remotely test the integrity of its lines. The company also offers home networking systems and sells these products mainly to U.S. telephone operating companies, as well as OEMs and MSOs.

For FY2005, ending 6/24/05, revenue was $26.79 million with $1.39 million in net income compared to FY2004 revenue of $28.48 million and $1.56 million in net income.

During the quarter ending 9/30/06, sales were $11.03 million with net earnings of $1.51 million; a lot of this was due to a slight surge in product orders because of the recent hurricanes.

TIII understands that, because of competing technologies, there has been a reduction in the number of telephone access lines being deployed. So, the company is allocating more resources toward the R&D and marketing of new products such as its multi-service residential gateway system. Seems like a good idea to us.

Our 24-month target for the stock is $4.00 to $5.00.

For more information, contact TIII’s Kenneth Paladino at 631-789-5000.

Look for the April 5, 2006 Newsletter to be posted on 4/3 or 4/4.

Thank you,


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