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Hello Readers,
Since the last Newsletter, we closed two more positions, one for a very nice gain and another for an ugly loss:
Kosan Biosciences (5/5/08). Closed position 5/29/08 at $5.43 for a 227% GAIN.
Aviza Technology (10/5/04). Closed position 5/28/08 at 53 cents for a 92% LOSS.
Never in our twelve years of publishing this Newsletter have we ever had two picks be acquired for such huge gains within three weeks of one another. Earlier in May, Iomai was acquired by Intercell, and then, at the end of the month, Kosan was bought out by Bristol-MyersSquibb for $5.50 a share. And this happened in a very crummy market. We closed Aviza for a long expected loss.
The good news is the cataclysmic sell-off that we have been expecting hasn’t yet occurred. That’s also the bad news, as we have periodically mentioned over the last few months. No, we are not hoping for doomsday, but the market needs a new base, or reference points of true value. The credit crunch and soaring energy costs still have not been factored into most stock prices and, until that happens, the markets, as well as our own Current Portfolio, will keep floundering and flapping in its current sideways pattern. Of course, every time the market is prepared to atomize the Fed/government steps in to prop things up, and this has become a new and unfamiliar problem. Waiting is tough and bottom fishing can be maddening, but, for now, the operative word is patience.
Here are the headlines since the last Newsletter about companies in the Current Portfolio. Dates in parentheses are when we first recommended them.
Microvision (MVIS) (5/20/08). Unveils advancements in its Ultra-Miniature PicoP display engine.
Micromet (MITI) (4/20/08). Roth Capital gives the stock a “buy” rating. To present clinical update for BiTE antibody MT103/MEDI-538 at the International Conference on Malignant Lymphomas on June 5.
Kopin Corp (KOPN) (4/20/08). Showcases breakthrough shrinking display technology at SID 2008. Receives NASDAQ delinquency notice due to delay in filing form 10Q, but receives stay of delisting pending outcome of July 17 hearing.
Rodman & Renshaw (RODM) (3/20/08). Expands investment banking division to enhance public offering business. To present at electronic trading confab on June 6.
Barrier Therapeutics (BTRX) (3/20/08). Teams with Proctor and Gamble to sell its skin gel with Head & Shoulders shampoo.
Entrust (ENTU) (2/20/08). Helps Chilean financial institutions comply with government regulation, lands 10 of top 16 banks. Brokerage firm announces it has implemented ENTU’s Identity Guard. Company’s PKI solution chosen by new customer in Asia-Pacific region.
Amicas (AMCS) (1/20/08). Integrates its Vision Series PACS at more than 100 MEDITECH facilities.
Nanophase (NANX) (1/20/08). Expands into new market segments.
Catalyst Pharma (CPRX) (12/20/07). Recent balance sheet still looks okay.
Move, Inc. (MOVE) (1/5/08). To present at Oppenheimer conference on June 3.
DigitalFX (DXN) (12/5/07). This one went bad very quickly in recent months and recent numbers explain why. Losses were ugly and balance sheet has weakened. This is now on the “Endangered List”.
Santarus (SNTS) (11/20/07). Announces development program for new ZEGERID prescription product. Achieves $2.5 million regulatory milestone under OTC license pact with Schering-Plough. Announces positive clinical data with ZEGERID capsules in controlling 24-hour gastric activity presented in DDW abstract.
Continuecare (CNU) (11/20/07). Expands share buyback program.
Linktone (LTON) (11/5/07). Unaudited 1stQT revenues increase 28% sequentially, but losses widen; balance sheet still looks strong.
Sunesis Pharmaceuticals (SNSS) (11/5/07). To present clinical data on ovarian cancer drug candidate at various cancer confabs. Initiates Phase 2 clinical trial of Voreloxin (SNS-595) in acute myeloid leukemia.
Wave Systems (WAVX) (9/5/07). Receives non-compliance notice from NASDAQ and will appeal, which may give company another 180 days grace period. To complete $1.7 million stock offering.
SIGA Technologies (SIGA) (8/20/07). Advances Dengue antiviral program.
Radcom (RDCM) (7/20/07). To join Nokia Siemens networks Traffica certification program.
PharmacyclicsU(PCYC) (6/20/07). Receives NASDAQ notice saying it is back in compliance with minimum bid rule.
Oncolytics (ONCY) (6/5/07). Announces issuances of 9th Canadian patent and 27th U.S. patent. Transfers 40-litre cGMP manufacturing process for REOLYSIN. Collaborators present Phase 2 Sarcoma trial results at recent ASCO meeting.
Encorium Group (ENCO) (5/20/07). Lands $3.2 million of new business contracts for Europe and North America.
Hana Biosciences (HNAB) (5/5/07). Receives notice from NASDAQ that it does not comply with minimum equity requirement. This has now become wait and see.
ECtel (ECTX) (5/5/07). Receives second order from China. Named as finalist for Most Prestigious Award in BSS industry.
Ore Pharmaceuticals (ORXE) (4/20/07). Shareholders okay 1-for-5 reverse stock split. This is on the “Endangered List”.
VocalTec (VOCL) (4/20/07). Inks agreement to sell 11 of its 22 patents for $12.5 million. This is on the “Endangered List”.
Immunicon (IMMC.OB) (3/20/07). To present at 2008 ASCO annual meeting that ends on June3.
Urologix (ULGX) (2/20/07). Long-term results for company’s cooled ThermoTherapy presented at AUA. Launches new CTC advance catheter at AUA annual confab.
UQM Technologies (UQM) (2/5/07). FY numbers show some nice growth but losses widen; balance sheet still looks good.
Neose Technologies (NTEC) (12/20/06). Announces two abstracts on GlycoPEGylated Factor Vlla accepted for presentation at hemophilia world congress. Receives milestone payment from Novo Nordisk on Factor IX program.
CardioTech (CTE) (12/20/06). Forms new subsidiary, AdvanSource Biomaterials, which it says strategically reflects its business model.
Proxim Wireless (PRXM) (11/5/06). To present at Red Chip small-cap investor confab on June 5. Proxim and OciusB2 provide wireless network for digital inclusion community projects in St. Helens and North Liverpool. Expands WiMAX family to include ultra-secure point-to-point and point-to-multipoint solutions.
Hydrogenics (HYGS) (9/20/06). To supply hydrogen electrolyzer for a community wind-hydrogen-diesel system.
Advanced Life Sciences (ADLS) (7/20/06). Selected as a founding member of the new NASDAQ OMX AeA Illinois Tech Index.
NTN Buzztime (NTN) (7/5/06). Names new chairman/CEO. Determines “Rookie Program” a success.
Tri-S Security (TRIS) (5/5/06). Snags two contracts valued at $5 million from the Department of Homeland Security and DOD.
Lipid Sciences (LIPD) (2/20/06). Granted second patent for core technology. Receives NASDAQ non-compliance notice. This one is making us nervous.
8×8 (EGHT) (1/20/06). Posts nice-looking quarterly and FY numbers; balance sheet still looks good. Adds call queuing functionality to Packet8 virtual office small business phone service. So, why isn’t this one higher? Like a lot of our picks, it’s the market!
Westell (WSTL) (10/20/05). Quarterly and FY numbers pretty lousy; balance sheet still looks good.
RAE Systems (RAE) (10/5/05). Awarded contract to provide radiation and toxic gas screening for Beijing International Airport. To introduce new gas detection products for industrial hygienists.
TMNG Global (TMNG) (4/20/04). Introduces three new ascertain revenue assurance software solutions for U.S. cable, digital video, and broadband providers.
Our picks for this Newsletter are a lighting equipment maker and a application software developer, both trading on NASDAQ.
ENERGY FOCUS, INC. (NASDAQ: EFOI) – $2.39. Twelve-month hi-low has been $9.95 – $1.78. Based in Solon, OH, with about 100 employees, this equipment maker has 14.8 million shares outstanding, $26.38 million in total current assets, $36.1 million in total assets, little debt, and $8 million in total liabilities. Institutional ownership is around 26%. www.energyfocusinc.com
Many of us already have a few of those Al Gore light bulbs in our homes, and while Energy Focus, Inc. isn’t offering those, it is pinning some of its future on a different kind of lighting system that saves energy. It also helps that the company has a half-way decent balance sheet.
Founded in 1985 as Fiberstars, and public for over a dozen years, Energy Focus manufactures and markets fiber optic lighting systems for use in general commercial, and the pool and spa lighting markets. Billing itself as the world’s leading supplier of fiber optic lighting, the company’s products consist of illuminators, fibers, fixtures, light bars, star kits, light saver dock light, tools and accessories, and light emitting diode products. Its products also include customized components, such as underwater lenses, color-changing electric pool lights, landscape lighting fixtures, and a line of lighted water fixtures, including water falls and laminar-flow water fountains.
Energy Focus appears to be banking on its patented new EFO (Efficient Fiber Optics) lighting system that it claims is breakthrough lighting technology that delivers light comparable to conventional lamps at greatly reduced energy consumption with savings as much as 80% over halogen or other incandescent lighting systems. EFO significantly reduces watts per square foot without sacrificing light levels and helps meet new energy regulations; and provides energy efficient downlighting, which can be used for spot lighting, accent lighting, and display case lighting. Customers include retail stores, restaurants, commercial buildings and government and other public spaces.
Energy Focus products are made under 51 patents with 28 more patents pending and are distributed in more than 29 countries including Europe, Australia, India, China, and Japan. Some of its customers have been McDonald’s, Disney, Tiffany’s, Macy’s, Starbucks, Giant Food, and Nordstrom’s.
For FY2007, ending 12/31/07, revenue was $22.89 million with $11.32 million in losses compared to 2006 revenue of $27 million and $9.65 million in losses. During the 1stQT of the current FY, ending 3/31/08, revenue was $4.83 million with $3.45 million in losses, which, on the surface, is nothing to write home about. However, EFO sales accounted for 44% of the company’s revenues, compared to 39% in the previous quarter. The company expects to see strong growth in EFO sales through 2008 and thereby hopes to overcome forecasted declines in its traditional product sales.
The energy climate may be opportune for Energy Focus to turnaround on its EFO lighting systems.
Our 24-month target for the stock is $4.25 to $4.50.
For more information, contact EFOI’s Nicholas Berchtold at 440-715-1300.
BRIDGELINE SOFTWARE, INC. (NASDAQ: BLSW) – $3.00. Twelve-month hi-low has been $5.09 – $2.10. Located in Woburn, MA, with about 135 employees, this application software developer has 9.5 million shares outstanding, $7.83 million in total current assets, $26.34 million in total assets ($16.54 million is “goodwill”), little debt, and $3.25 million in total liabilities. Institutional ownership is around 19%. www.bridgelinesw.com
So, what happens when a relatively new public company goes on a mini-acquisitions binge? With Bridgeline Software, Inc. we are about to find out, and, judging from its recent quarterly numbers, we may not have long to wait.
Founded in 2000, and public for nearly a year, Bridgeline Software develops Web service applications. Helping to provide these services were the acquisitions of Objective, Inc. in July, 2007 and Tenth Floor, Inc. this past February. Bridgeline’s services include various Web development solutions, such as information architecture and usability engineering, interface configuration, Web applications development, rich media, eCommerce, eLearning and eTraining, search engine optimization, and content management. The company also provides various managed services, such as retained professional services and hosting. In addition, it offers application monitoring, emergency response, version control, load balancing, managed firewall security and virus protection services, as well as shared hosting, and software as a service hosting services.
Bridgeline also provides various Web application management products, including iAPPS, a suite of products consisting of Content Manager, Analytics, Commerce, and Marketier. The iAPPS framework allows application development teams to develop Web applications based on analyzing and optimizing customers’ business processes, and then map the results to a common software component solution. Additionally, it offers Orgitecture, a suite of on-demand software-as-a-service Web-based tools designed to streamline Web site management and reduce development costs.
Bridgeline currently has over 500 customers, included are Bank of New York Mellon, Goldman Sacks, the Discovery Channel, Brown University, Nomura Securities, PerkinElmer, John Hancock, UBS, T. Rowe Price, Citibank, Careerbuilder.com, Fabric.com, and Sepracor.
For the FY ending 9/30/07, revenue was $11.15 million with $1.9 million in losses. During the first six months of the current FY, ending 3/31/08, revenue was $9.6 million with $149,000 in net income.
Despite the sloppiness in the markets, tech stocks have been having some minor success and Bridgeline seems to be on the right track to similar successes.
Our 24-month target for the stock is $5.00 to $5.75.
For more information, contact BLSW’s Gary Cebula at 781-497-3002; gcebula@bridgelinesw.com
Look for the June 20, 2008 Newsletter to be posted on 6/16 or 6/17.
Thank you,
George