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Hello Readers,
As we have said over the years, these things always seem to come in bunches, and, since the last issue, we closed eight positions, seven for healthy gains and one for an ugly loss.
MISONIX (5/20/03). Closed position 1/14/04 at $6.15 for a 68% GAIN.
JMAR TECHNOLOGIES (1/5/04). Closed position 1/12/04 at $4.68 for a 70% GAIN.
NUVELO (10/20/03). Closed position 1/12/04 at $4.80 for a 68% GAIN.
ACCESS PHARMACEUTICALS (11/5/01). Closed position 1/8/04 at $6.45 for a 57% GAIN.
JACADA (6/20/03). Closed position 1/7/04 at $4.45 for a 81% GAIN.
AIRSPAN NETWORKS (1/20/02). Closed position 1/7/04 at $3.98 for a 62% GAIN.
SIRIUS SATELLITE RADIO (12/20/03). Closed position 1/5/04 at $4.10 for a 86% GAIN.
DIOMED (7/5/02). Closed position 1/5/04 at 30¢ for an 85% LOSS.
In the last Newsletter, we said that Sirius would be closed shortly, and, at an 86% gain, it was a nice start to 2004. A few months back, we made the comment that Airspan should be a lot higher, and, eureka, the stock made a nice move. Jacada soared on news that LexisNexis selected JCDA to automate order processing for its service center. Access finally regained some lost glory on news that AKC had inked a licensing deal with Wyeth. JMAR began to tear from the day we posted it thanks to a plug in Motley Fool and news of added financing. To be honest, we don’t know what moved both Nuvelo and Misonix, which haven’t had any real news since November, and we don’t really care. Lastly, we closed Diomed because it appears that not even a raging bull can spark the stock.
If you need to know our sentiments about the markets, please re-read the last Newsletter, but buried in all the hoopla over the Dow and NASDAQ is the un-trumpeted story about the Russell 2000. Now trading near 585 the R2K is around its all-time historical high.
Here are the headlines since the last Newsletter about companies in the Current Portfolio. Dates in parentheses are when we first recommended them.
DRAXIS Health (DRAX) (3/20/00). Reaches labor pact with union. This is now our longest-running pick. Will 2004 finally be the year we can close it? We’re close.
MCF Corp (MEM) (1/20/01). Launches asset management subsidiary. A lot of low price stocks on the AMEX have had some nice pops, lately.
Hauppauge Digital (HAUP) (2/5/01). WinTV-PVR 250 sales exceed WinTV-Go sales for 1st QT of FY2004.
Digital Power (DPW) (2/20/01). Names new CEO. Raises $250,000 through stock sale to Telkoor Telecom.
CE Franklin (CFK) (5/5/01). Names new board chairman.
AROTECH (ARTX) (6/5/01). Here’s one that, with all of the good news, should be a lot higher, given current market conditions. Enters definitive agreement for $18.5 million direct equity placement. To buy FAAC, Inc., a leading military simulation company, for $14 million. Acquires Epsior Electronics, of Israel, a military lithium battery maker, for $10 million. Says 2003 revenues will top $17 million versus 2002 revenues of $6.4 million.
Orthovita (VITA) (12/20/01). The only thing probably weighing on the stock right now is its intention to raise funds with a 10 million share offering. FDA gives 510K okay to market the VITOSS bone graft product. Then, FDA gives approval to VITA’s new Endoskeleton platform to repair damaged bond in the spine.
Hemispherx (HEB) (7/5/02). Accelerates new oral SARS prevention program. Announces joint SARS clinical program with Vanderbilt University.
Generex (GNBT) (8/5/02). Presents promising data on efficacy of DNA vaccine technology at NIH conference. Raises $2.5 million through private placement. Reports on novel mechanism for immunotherapy cure of prostate cancer.
Distributed Energy (DESC) (9/20/03). Announces distribution of shares by venture funds.
Targeted Genetics (TGEN) (10/5/03). Extends AIDS vaccine partnership with IAVI and CCRI.
MetaSolv (MSLV) (10/5/03). Selected by TELUS for IP VPN service activation.
Insmed (INSM) (11/5/03). University of Rochester awarded $6.5 million to study the efficacy of Insmed’s SomatoKine in the treatment of Myotonic Dystrophy.
V.I. Technologies (VITX) (11/20/03). Announces $6.6 million private placement at 90¢ a share, which may depress the stock, but would help VITX immensely. Settles claims against Precision Pharma.
SatCon (SATC) (12/5/03). California Energy Commission approves company’s power conversion system for photovoltaics.
Actuate (ACTU) (1/5/04). Niku embeds latest release of Actuate to delivery intuitive, enterprise reporting to 100% of application users.
Curon Medical (CURN) (12/20/03). Publication of U.S. trial provides additional peer-reviewed evidence demonstrating safety and efficacy of Secca procedure.
Our picks for this issue are a security play trading on the AMEX and a technology solutions provider that trades on NASDAQ.
IMAGEWARE SYSTEMS, INC. (AMEX: IW) – $3.28. Twelve-month hi-low has been $3.60 – $1.75. Based in San Diego, CA, with about 100 employees, this software maker has 5.5 million shares outstanding, $4.15 million in total current assets, $12.49 million in total assets ($5.3 million is Goodwill), and $8.16 million in total liabilities, of which $1.3 million is long-term debt. Institutional ownership is around 6%. One analyst has the stock as a “hold”. http://www.iwsinc.com
Here’s another one where the balance sheet isn’t up to our usual liking, but ImageWare Systems, Inc. may be one that you buy as a “security play”, which seems like a pretty good risk is this day and age. Shortly after 9/11, the stock popped to around $9, and other stocks of this genre made sizeable gains back then.
Founded in 1987, ImageWare develops digital technologies for four product lines, namely secure credentials, biometrics, law enforcement, and professional photography. IW’s secure credential solutions enables development of secure IDs and credentials, drivers’ licenses, passports, national IDs, access control products, and custom, biometric-based solutions for the aviation, transportation, government, education, and private sectors. The company’s law enforcement/public safety solutions provide digital mugshot, booking, facial recognition, data sharing composite sketching and investigative technologies for federal, state, and local law enforcement agencies.
IW’s product line focuses primarily on its flagship digital imaging and workflow technologies. These provide professional photographers with automated in-studio and mobile solutions to facilitate transitioning from film-based photography to digital imaging.
This looks to be a company in motion. In December, IW closed on a $7 million private placement financing that should improve its next balance sheet; formed an alliance with ScreenCheck, a global provider of card solutions; and was chosen by the New South Wales Police (Australia) to implement a browser-based investigative solution. At the start of this year, the Missouri City Police Department, in Texas, selected the company to replace its existing mug shot solution with IW’s Crime Capture System, which is a complete digital booking, identification, and investigative solution.
For FY2002, ending 12/31/02, revenue was $18.25 million with $4.85 million in losses. During the first nine months of FY2003, ending 9/30/03, revenue was $12.8 million with $4.3 million in losses, however, in the 3rdQT the loss was only $116,000.
Like it or not, this is the age of Big Brother or “1984”. Governments of all forms will be spending buckets of money over the ensuing years to upgrade their security solutions and IW appears positioned to garner a few of those dollars.
Or 20-month target for the stock is $6.00 – $7.00.
For more information, contact IW’s Andrea Alfonso at 858-673-8600; aalfonso@iwsinc.com
PEERLESS SYSTEMS, INC. (NASDAQ: PRLS) – $2.55. Twelve-month hi-low has been $4.00 – $1.36. Located in El Segundo, CA, with about 100 employees, this technology solutions provider has 15.7 million shares outstanding, $15.6 million in total current assets, $18.78 million in total assets, little debt, and $7.7 million in total liabilities. Institutional ownership is around 26%. One analyst rates the stock a “strong buy” and another as a “hold”. http://www.peerless.com
There are still some tech stocks that haven’t felt the updraft of the recent market hurricane, but it could only be a matter of time before Peerless Systems, Inc. gets caught in the storm.
Founded in 1982, and trading on NASDAQ since 1996, Peerless licenses software-based imaging and networking technologies to manufacturers of color, monochrome, and multifunction office products and digital appliances. The company sells primarily to wholesalers a broad line of embedded controllers, software development kits, network enabling software, custom silicon and turnkey solutions. Peerless offers customers a customized one-stop-shop for products and with quick turnarounds. Peerless controllers achieve their performance objectives by interpreting printer description languages, such as Adobe PostScript, PeerlessPrint 5C or PeerlessPrint 5E and PeerlessPrint 6, while simultaneously executing faster imaging processing commands on its proprietary co-processor.
In addition to its core monochrome technologies, Peerless has developed and commercialized a high performance color imaging and printing technology and new open architecture named Sierra. This may be worth keeping an eye on.
Many of the world’s leading printing manufacturers rely on Peerless technologies, including Canon, Minolta, IBM, Matsushita, Ricoh, Seiko, Epsom, Xerox, Hitachi, HP, Konica, Kodak, and Toshiba.
The stock has been marking time because in early December, Peerless lowered its 4thQT guidance, due to product launch delays from two customers. At the beginning of this month, PRLS signed a new agreement with Legend, of Beijing China, to utilize Peerless controllers and technologies for an upcoming color printer to be marketed in that country.
For the FY ending 1/31/03, revenues were $31.8 million with $124,000 in net income. During the first nine months of this FY, ending 10/31/03, revenues were $17.6 million with $5.5 million in net losses.
Peerless had a rocky 2003, but we can’t help but think that most of the bad numbers may be behind the company. Also, given its customer base, PRLS looks like a good bet at these levels.
Our 20-month target for the stock is $4.75 – $6.00.
For more information, contact PRLS at 310-536-0908; info@peerless.com
Look for the February 5, 2004 issue to be posted on 1/30 or 2/2.
GO EAGLES!!!
George