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Hello Readers,
We did not close any positions since the last Newsletter. Our Current Portfolio is feeling the effects of the recent market slaughter, particularly in the NASDAQ and Russell 2000 averages. Of course, the big bugaboos are nose-bleed oil and gasoline prices, and now rising interest rates are gaining more attention than they had been. The Fed is still following the previous chairman’s mind set, which is to raise rates in hopes of calming inflation. Doesn’t raising rates only fuel inflation, since this expense will also be factored into costs, which, in turn, leads to higher prices? A major key for the markets between now and the Fall is what the Fed does at its June meeting. It may not be pretty. Now, after having sounded like the Grim Reaper, the markets all too often take off during the darkest moments.
Here are the headlines since the last Newsletter about companies in the Current Portfolio. Dates in parentheses are when we first recommended them.
Kintera (KNTA) (5/5/06). Exceeds revenue guidance for 1st QT 2006; balance sheet still looks good.
TRI-S Security (TRIS) (5/5/06). Releasing quarterly results May 16, the day we post this Newsletter. Subsidiary joint venture garners $8 million government contract while another snares $19 million.
Pharmos (PARS) (4/20/06). First QT balance sheet still looks good.
ClickSoftware (CKSW) (4/5/06). Electronics specialty retailer licenses CKSW solution for work resource management. Quarterly results seem okay as does balance sheet.
ThermoGenesis (KOOL) (4/5/06). Quarterly numbers look pretty good, as does balance sheet. Receives Japanese patent for its BioArchieve system. New data shows that AutoXpress System (AXP) efficiently separates stem cells from cord blood.
Cytogen (CYTO) (3/20/06). Quarterly product revenues set record; balance sheet still looks good. Gets FDA clearance on IND for hormone-refractory prostate cancer treatment. Enters into royalty buyout agreement with Berlex.
TII Network (TIII) (3/20/06). Recent results show sequential sales and operating earnings improvement; balance sheet still looks good.
Q Comm (QMM) (3/5/06). Will delay 10Q filing due to recent upgrade of its accounting infrastructure and software.
Lipid Sciences (LIPD) (2/20/06). Balance sheet still looks healthy. To begin patient recruitment for clinical trial of its Plasma Delipidation System-2.
Adherex (ADH) (2/20/06). Balance sheet still looks good. Closes $6.5 million private placement. Concludes Phase 1b component of European ADH-1 trial; will present data at the annual 2006 ASCO meeting on June 3.
Gateway (GTW) (2/5/06). About a dozen news articles in which GTW is mentioned.
MIND C.T.I. (MNDO) (2/5/06). Quarterly results very upbeat; balance sheet still looks strong.
8×8 (EGHT) (1/20/06). Earnings call slated for May 25.
Ceragon (CRNT) (1/5/06). First quarter numbers show good revenue growth but earnings weaken a little; balance sheet still looks good.
Castelle (CSTL) (1/5/06). CEO discusses revenue growth and latest generation of fax servers in annual shareholders letter.
Digital Angel (DOC) (12/20/05). Reports record revenue in quarterly report; balance sheet still looks strong. Receives okay for new SARBE G2R emergency location transmitter with GPS capability from Cospas-Sarsat.
Fusion Telecom (FSN) (12/5/05). Quarterly numbers reflect revenue growth over previous quarter; balance sheet still seems okay. To launch new efonica VoIP. Files patent application for its SIP peer-to-peer VoIP communication.
Memory Pharma (MEMY) (11/5/05). To present at Bank of America (BOA) health care confab on May 18. First quarter report upbeat; balance sheet still looks okay.
Westell (WSTL) (10/20/05). Numbers don’t meet modest expectations and stock drops; balance sheet still seems to be very strong.
RAE Systems (RAE) (10/5/05). First quarter numbers show a slight loss; balance sheet still looks good. Two brokerage firms downgrade stock but stock price still goes up a little. Signs cooperation pact with security integrator Henry Brothers Electronics. Partners with Aegison Corp. to deliver sensor driven digital video for security applications.
Discovery Partners (DPII) (10/5/05). Quarterly numbers show widening loss; balance sheet still looks very strong.
EntreMed (ENMD) (9/5/05). Initiates combination Phase 2 clinical trial with Panzem NCD in carcinoid cancer. Enters Phase 1 clinical trial for ENDM-1198 in advanced cancer patients. Balance sheet still seems okay.
Zi Corp (ZICA) (8/5/05). Feels 1st QT numbers reflect momentum gained from late last year; balance sheet still seems okay.
N.A. Scientific (NASI) (8/5/05). Presents data on brachytherapy treatment to NRC advisory committee. Receives delisting notice from NASDAQ – may be removed from National Market, but probably could end up on Small Caps.
Innodata (INOD) (7/5/05). Quarterly numbers not great but CEO optimistic; balance sheet still looks good.
Electric City (ELC) (7/5/05). Reports 1st QT results. Even though this faces AMEX delisting, Dutton Associates gives this a “speculative buy”. This is on the “Endangered List”.
Commerce Energy (EGR) (6/5/05). Reports ACN filing of arbitration claim with the American Arbitration Assoc. Until this is resolved, stock price could remain depressed.
Vion Pharma (VION) (5/20/05). Quarterly report still shows healthy-looking balance sheet.
Verticalnet (VERT) (4/5/05). Releases quarterly numbers. This is on the “Endangered List”.
Loudeye (LOUD) (4/5/05). We’re half-tempted to place this on the Endangered List. No matter that it had good news, the stock keeps dropping. Microsoft renews its agreement. 1st QT numbers look okay. Company sells Muze, Inc. for $11 million.
Advancis Pharma (AVNC) (12/20/04). Gets FDA approval for new Keflex dose. 1st quarter balance sheet still looks healthy.
Applied Micro Circuits (AMCC) (11/20/04). Being replaced in the S&P 500 by Embarq.
Nova Measuring (NVMI) (11/5/04). First quarter numbers show pretty good growth; balance sheet still seems okay. Chairman resigns.
Aviza Technology (AVZA) (10/5/04). Releases 2nd QT results.
Chordiant Software (CHRD) (9/20/04). Launches Chordiant Mesh, which it claims radically transforms enterprise software. Receives award from trade magazine. Reports record revenue numbers; balance sheet still looks good. Names new marketing chief.
AIXTRON (AIXG) (7/5/04). Releases upbeat quarterly numbers.
Network Engines (NENG) (6/5/04). Signs distribution deal with NOXS.
TMNG Global (TMNG) (4/20/04). Quarterly numbers so-so; balance sheet still looks good. Kaufman Brothers upgrades stock to a “buy”.
Palatin (PTN) (4/5/04). PTN and King Pharma complete enrollment in two Phase IIb clinical trials evaluating Bremelanotide in patients with erectile dysfunction. Quarterly report reflects so-so balance sheet.
Nexmed (NEXM) (4/5/04). Releases 1st QT numbers. This one is on the “Endangered List”.
OpenTV (OPTV) (3/20/04). Quarterly numbers look okay, as does balance sheet. Powers HDTV for French satellite company.
Investors Capital (ICH) (4/20/06). Declares 4¢ dividend.
Aviza (AVZA) (10/5/04). Quarterly report shows revenue growth and raises annual gross margin expectations.
AVANT Immuno (AVAN) (12/5/03). Quarterly report still shows healthy looking balance sheet.
Insmed (INSM) (11/5/03). Study says growth drug works. Quarterly reports reflects very healthy looking balance sheet.
Monogram Bio (MGRM) (7/20/01). Stock gets a nice boost as Pfizer agrees to invest $25 million in the company. Quarterly numbers look okay as does balance sheet.
Cognitronics (CGN) (10/20/05). 1st QT numbers reflect decent revenue growth from a year ago; balance sheet looks okay.
Our picks for this Newsletter are a NASDAQ-listed tech company and an AMEX listed biofuels play, of sorts.
iCAD, INC. (NASDAQ: ICAD) – $1.67. Twelve-month hi-low has been $4.51 – $1.01. Based in Nashua, NH, with about 85 employees, this small tech has 36.9 million shares outstanding, $9.41 million in total current assets, $59.39 million in total assets ($43.5 million is goodwill), and $8.3 million in total liabilities. Institutional ownership is around 5%. http://www.icadmed.com
Normally, we would like to see a better-looking balance sheet; one with more cash and less goodwill. However, iCAD, Inc. has had some recent developments that could get it back on track.
Founded in 1984, and public for over a dozen years, ICAD bills itself as an industry-leading provider of computer aided detection (CAD) products for the early detection of breast cancer and other medical diagnostics. The company claims to be the only independent, integrated CAD software and digitizer company. At the end of 2003, iCAD merged with and acquired CADx Systems and its parent company Qualia Computing, bringing together two of the three companies approved by the FDA to market CAD systems for breast cancer detection. ICAD states that its mammography CAD systems are able to detect up to 68% of actionable missed breast cancers an average of 15 months earlier than screening mammography alone.
The company’s CAD systems include software technology coupled with standard computer and display equipment. iCAD systems for the film-based mammography market also include a radiographic film digitizer that it manufactures. These “gateway to digital” programs are suppose to make the transition to digital CAD mammography easier for breast care facilities currently using film-based solutions. ICAD’s platform solution, The TotalLook, is a comprehensive film-to-digital offering that converts prior films to digital images. The company also makes medical film digitizers for a variety of medical imaging and other applications.
Last month, ICAD hired a new CEO and a Senior VP of Sales, plus a marketing VP earlier this month. Also, iCAD was awarded contracts from HealthTrust Purchasing Group and MedAssets Supply Chain Systems for its SecondLook CAD systems. In March, Siemens Medical Solutions agreed to become a distributor for ICAD’s CAD systems. Of particular note, at the end of April, a dark cloud was lifted when the company won a patent arbitration that stated an infringement claim was completely without merit.
For FY2005, ending 12/31/05, revenue was $19.77 million with $4.88 million in losses. During the 1stQT of FY2006, ending 3/31/06, revenue was $4.37 million with $1.67 million in losses. The company attributes the dismal first quarter to distractions caused by merger discussions with its principal competitor. However, in February, iCAD terminated these talks.
Obviously, iCAD hit a few bumps, but recent contracts and new executive hires show promise for the future.
Our 24-month target for the stock is $3.00 to $3.25.
For more information, contact ICAD’s Katy Dellechiaie at 937-431-1464; KDellechiaie@icadmed.com
O2DIESEL CORPORATION (AMEX: OTD) – $1.33. Twelve-month hi-low has been $2.97 – 37 cents. Located in Newark, DE, with about 20 employees, this alternative fuel company has 46.4 million shares outstanding, $5.53 million in total current assets, $5.73 million in total assets, little debt, and $1.72 million in total liabilities. Institutional ownership is negligible. One analyst rates the stock a “moderate buy”.http://www.o2diesel.com
Admittedly, chasing “fad companies” makes us nervous, but the oil “crisis” created mainly by energy traders doesn’t seem to be abating anytime, soon, so why not take a shot with O2Diesel Corporation. It also helps that they recently raised another $6.5 million in funding, which is not reflected on the current balance sheet.
Founded in 2000, and public since 2003, O2 Diesel is a development-stage company that is developing what it calls a revolutionary clean-burning diesel fuel alternative. The company offers a fuel additive product, O2D05, that it claims enables distillate liquid transportation fuels to burn cleaner by facilitating the addition of ethanol as an oxygenate to these fuels. The O2D05 is supposed to stabilize and enhance blending of fuel grade ethanol with diesel fuel. This fuel additive can be made from soybean oil, other vegetable oils, or animal fats.
Commercial introduction of O2D05 is now underway in Texas, California, and the Northeastern U.S. Customers include urban truck and delivery fleets, municipal transits, railroads, and some local and state governments. Other countries where OTD is focusing are Canada and Brazil, where it has a 75%-owned subsidiary O2Diesel Quimico’s, Ltd; as we all know, Brazil is probably light years ahead of the rest of the world when it comes to biofuels.
Since OTD is still transitioning from the R&D to the P&L stage, revenues are scant while losses are huge. For FY2005, ending 12/31/05, revenue was $196,000 with $6.85 million in losses. Revenues in 2004 and 2003 were $127,000 and $12,000, respectively.
Ethanol, biofuels, etc have become the new buzz words in the energy quagmire. OTD’s stock could make a nice run if oil starts shooting toward $100 bbl. Also, it helps that the company just raised $6.5 million.
Our 24-month target for the stock is $2.25 to $2.50.
For more information, contact OTD at 302-266-6000; info@O2Diesel.net
Look for the June 5, 2006 Newsletter to appear on May 31 or June 1.
Have a safe holiday,
George