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Hello Readers,
Over the last few weeks, we hit a dry spell insomuch as we didn’t close any positions, and we sense that may be the case until after the new year. The appetite for small stocks hasn’t been as vociferous as that for mid to large caps; volume trackers know this all too well. However, the markets, and, in particular, small caps, should gather new momentum right after the holidays, barring unforeseen global disturbances. And, we suspect that the markets will have more steam and go much higher than the average gurus have predicted. So, for the next few weeks, relaxation may be in order,
Here are the headlines since the last Newsletter about companies in the Current Portfolio. Dates in parentheses are when we first recommended them.
Napster (NAPS) (11/20/05). Launches digital music service in Germany.
NEON Systems (NEON) (11/20/05). Partners with FAST to bring enterprise search to mainframe data. Partners with Contivo to extend vocabulary management capabilities for accelerated mainframe integration.
IONA Technologies (IONA) (11/5/04). Leading Italian express mail provider selects IONA’s Artix.
Cognitronics (CGN) (10/20/05). Receives $1.2 million media server order.
RAE Systems (RAE) (10/5/05). Stock upgraded to a “buy” by Merriman Curhan Ford. Announces the first certified intrinsically safe radiation detector for first responders.
EntreMed (ENMD) (9/5/05). ENMD and Affymax present preclinical data for novel angiogenesis inhibitors. Receives new Panzem patent.
Zi Corporation (ZICA) (8/5/05). Announces five licensing agreements in Asia-Pacific, and, no, we haven’t a clue as to why the stock keeps dropping.
North American Scientific (NASI) (8/5/05). Set to announce 4th QT and FY 2005 results on January 9.
Electric City (ELC) (7/5/05). Subsidiary expands management and HVAC monitoring program with PC Richard & Son.
Commerce Energy Group (EGR) (6/5/05). Releases quarterly earnings, which seem pretty upbeat; balance sheet looks good.
Sirenza Microdevices (SMDI) (6/5/05). Broadens protection and application of self-biased Darlington amplifier patent.
Vion Pharma (VION) (5/20/05). Presents Cloretazine data at ASH annual meeting.
Verticalnet (VERT) (4/5/05). Drives sourcing of transport freight in Europe for Cargill. VERT technology selected by Fortune 100 manufacturer. Picked by Akzo Nobel to leverage advance sourcing for transportation categories for the U.S. and Europe.
Loudeye (LOUD) (4/5/05). Initiates cost reduction program with closure of content arm which is to save $200,000.
Mindspeed (MSPD) (2/20/05). To present at Needham confab on January 12. Ikegami shipping MSPD Broadcast Video Reclocker and cable driver in multi format production switcher.
Xcyt Therapies (XCYT) (1/20/05). A few months back, we placed this on the “Endangered List”. Company is now going to do a reverse merger with Cyclacel, a Scottish outfit. The transaction is planned to close by 3/31/06, and appears to be basically a 1 for 5 reverse split for XCYT shareholders with the new company being called Cyclacel Pharmaceuticals and would trade under the proposed symbol CYCC.
B.O.S. (BOSC) (1/5/05). Subsidiary expands its long term supply pact with the Israeli Aircraft Industry by about $2 million.
Net2Phone (NTOP) (11/5/04). 1st QT net loss narrows and IDT raises its tender offer to $2.05 a share, which we still feel is a steal since NTOP still has $90 million in cash and marketable securities.
Aviza Technology (AVZA) (10/5/04). This was Trikon up until the first of this month and, for now, appears to be one merger that is working for the old Trikon shareholders.
Tripath (TRPH) (8/5/04). This also has been on the “Endangered List” for several months, and has now been kicked off NASDAQ and trades on the Pink Sheets. Will showcase new products at the Consumer Electronics Show in Vegas January 5 – 8.
Chordiant Software (CHRD) (9/20/04). CompuCredit selects CHRD technology as the foundation for its Enterprise Lending Platform. Stock downgraded by brokerage firm after CHRD sees a larger 4th QT loss and says it will need to restate results for first three quarters of FY 2005, however, stock doesn’t tank and, for now, seems to be holding up.
Aixtron (AIXG) (7/5/04). Sells MOCVD system to Rainbow Opto for blue LED production. Launches R&D program with a Chinese university.
GlowPoint (GLOW.PK) (5/20/04). GLOW and Call One announce availability of IVE Video Packs featuring Plantronics headsets and Logitech web cameras. This is on the “Endangered List”.
GoRemote (GRIC) (5/5/04). This is getting contagious as another of our picks gets acquired. Scheduled to occur by 3/31/06, Ipass plans to buy GRIC for around $76.5 million or $1.71 a share.
Management Network (TMNG) (4/20/04). Teams with Primal Solutions to tackle challenges of IP transaction management. Expands its Cable Practice with launch of TMNG Digital Services Assurance.
Palatin (PTN) (4/5/04). To present at JP Morgan confab on January 12. Stock holds up despite the fact that PTN and Tyco had to issue a NeutroSpec warning for patients with heart problems.
NexMed (NEXM) (4/5/04). CEO departs and company announces big reduction in monthly burn rate with lay-offs of 26% of work force. Presents new data at ESSM including data on early ejaculation project. We’re placing this on the “Endangered List”.
Socket Communications (SCKT) (3/20/04). Teams with MicroMain to provide mobile productivity solution for facility operations professionals. Also joins with Logiciel to deliver advance mobile sales order system for wholesale distributor.
AVANT Immuno (AVAN) (12/5/03). Announces that Rotarix rotavirus vaccine has received a positive opinion from European regulatory authorities. Receives $5 million payment from Paul Royalty Fund.
Insmed (INSM) (11/5/03). Stock got a nice boost as FDA approves company’s drug Iplex for growth failure.
Art Technology (ARTG) (8/5/03). About six months ago, the stock was in the depths of the abyss, but has made a nice comeback on a constant stream of good news. This time, GE-owned Genpact purchases ATG’s Knowledge service suite.
Monogram (MGRM) (7/20/01). Presents data on PhenoSense benefits. Company’s eTag technology featured in British Journal of Cancer.
Our picks for this Newsletter are an AMEX-traded healthcare company and a NASDAQ-listed software security outfit.
DIGITAL ANGEL CORPORATION (NASDAQ: DOC) – $3.40. Twelve-month hi-low has been $9.85 – $2.31. Located in South St. Paul, MN, with about 240 employees, this health care company has 43.8 million shares outstanding, $30.48 million in total current assets, $96.63 million in total assets ($53.6 million is goodwill), and $17.12 million in total liabilities, of which $3.7 million is long-term debt. Institutional ownership is around 6%. http://www.digitalangelcorp.com
Usually, we don’t like to chase “fad type” companies, but Digital Angel Corporation has a decent-looking balance sheet and some products that should be around long after the avian flu scare/crisis passes.
Publicly traded since 1999 and a subsidiary of Applied Digital Solutions, Inc., Digital Angel develops and markets technology used to identify, locate, and monitor people, animals, and objects. Operating through several business segments, applications for the company’s products include pet identification using its patented FDA-approved implantable microchips; livestock identification and tracking using visual and RFID tags; real-time tracking of fixed and motor-winged aircraft through its FAA-approved satellite-based flight tracking and messaging system; and wireless emergency location of military aircraft and watercraft. Of particular interest is that over one million pets in the U.S. and over 10 million in Europe are protected by the company’s products under the Fearing Duflex brand.
It’s livestock business segment is run through Destron Fearing (USA), Daploma (Europe/Asia), and Digital Angel International (South America); pets and fish through Digital Angel; and the radio/GPS segment through Signature Industries and Outerlink Corp.
What seems to have caused DOC to stir, lately, is that at the end of November, the company announced it will introduce its patented Bio-Thermo (temperature-sensing) implantable RFID microchip system to the poultry/bird markets with initial emphasis in Asia. The technology would allow early identification of temperature increases in individual birds that may permit rapid ID and help control outbreaks of bird flu or other avian diseases. Fueling this momentum was when the Senate recommended to the Agriculture Department that it consider DOC’s RFID technology in a national animal ID program. Also, in November, the company claimed it exceeded 2005 South American sales guidance with sales of more than 1.1 million livestock tags.
For FY2004, ending 12/31/04, revenue was $46.3 million with about $5 million in losses. During the first nine months of FY2005, ending 9/30/05, revenue was $42 million with $2.37 million in losses, and, so, it looks as if 2005 will be better than 2004.
The company seems to be at the right place at the right time, and, even after the bird flu “crisis” passes, DOC’s products should be in demand for a long time.
Our 24-month target for the stock is $5.75 to $6.50.
For more information, contact DOC at 800-328-0118 or 651-455-1621; CustomerService@DigitalAngelCorp.com
AUTHENTIDATE HOLDING CORPORATION (NASDAQ: ADAT) – $2.00. Twelve-month hi-low has been $6.90 – $1.86. Based in Schenectady, NY, with about 120 employees, this software and services company has 34.4 million shares outstanding, $62.54 million in total current assets, $76.03 million in total assets, little debt, and $6.78 million in total liabilities. One analyst has the stock as a “hold”. Institutional ownership is around 37%. http://www.authentidate.com
Sometimes it may pay to chase a company that has been in a rut caused by restructuring issues and hassles with its most visible client, but only bet on it if their is a good-looking balance sheet. Such seems to be the case with AuthentiDate Holding Corporation.
Known by its present name since 2001 and public for over a dozen years, AuthentiDate provides web-based content authentication services that address the verification of digital information in business processes. The company’s core service offering is based in secure content authentication, utilizing technology and processes based upon auditable time stamps, hash codes, and non-repudiation services.
ADAT’s major products are: USPS Electronic Postmark (USPS EPM), a web-based security service that allows users to verify authenticity, provide tamper protection, and date and time stamp electronic documents and files. Evidence of content authenticity is stored in the USPS EPM repository for seven years. Global EPM, which is for post offices and governments worldwide and includes all the software required to run an EPM data center. The Trust Toolkit offers options for any business to add trust and non-repudiation services to their environment, such as identity verification (out-of-wallet quiz), content security, data choices, security options (optional use of digital certificates) and managed solutions.
The company’s partners are the U.S. Postal Service, Microsoft, and RSA Security.
In October, the company introduced CareFax, a fax workflow and authentication solution for healthcare providers and payers; several healthcare facilities have already deployed them. At about the same time, ADAT received a third notice from the U.S. Postal Services that the company isn’t meeting sales performance requirements, however, the Post Office has elected not to terminate the agreement and will continue discussions.
For FY2005, ending 6/30/05, revenue was $17.53 million with $19.18 million in losses versus 2004 revenues of $19.24 million and $15.67 million in losses. During the first quarter of FY2006, ending 9/30/05, revenue was $4.3 million with $3.75 million in losses.
Obviously, the company needs to juice it marketing program, which it feels began to gain traction during the last quarter.
Our 24-month target for the stock is $3.75 to $4.00.
For more information, contact ADAT’s Todd Fromer at 212-896-1215; investor_relations@authentidate.com
Look for the January 5, 2006 Newsletter to be posted on 1/3 or 1/4.
Happy Holidays,
George