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Hello Readers,
Since the last Newsletter, we have closed five positions, four for gains and one for a loss.
IONA TECHNOLOGIES (11/5/05). Closed position 4/26/06 at $4.73 for a 52% GAIN.
ACTUATE CORP (2/20/04). Closed position 4/20/06 at $4.75 for a 50% GAIN.
ACTIVE POWER (11/20/03). Closed position 4/18/06 at $5.85 for a 67% GAIN.
TELECOM SYSTEMS (6/20/05). Closed position 4/18/06 at $3.38 for a 52% GAIN.
SOMERA (2/20/04). Closed position 4/18/06 at $3.35 for a 88% LOSS. (price reflects reverse split).
IONA had been on a gradual climb since last December and pierced our 50%-plus threshold, and although it could have some more life left, we’re happy with the gain. For over two years, Actuate (ACTU) had some wild swings and, at last, had a move up to the 50% mark. It took long enough, but we finally closed Active Power (ACPW), which probably got a boost because of oil prices. Telecommunication Systems (TSYS) got a nice pop on the day it expanded its partnership with Rand McNally by releasing a second mobile phone application. And we closed Somera (SMRA) for a nasty loss and for reasons stated in previous newsletters.
Our feelings about the markets are unchanged from the last Newsletter (hit the replay button). The markets are digesting the effect that higher crude prices will have on future earnings. It’s also trying to get a better feel on interest rates.
Here are the headlines since the last Newsletter about companies in the Current Portfolio. Dates in parentheses are when we first recommended them.
Click Software (CKSW) (4/5/06). Earnings call slated for May 1, the day this Newsletter is posted.
ThermoGenesis (KOOL) (4/5/06). To present at Deutsche Bank confab on May 3. Canada okays sale of Thrombin Processing Device. Signs distribution pacts in the UK and Hungary. Reports on successful production of activated Thrombin from patient’s whole blood.
Cytogen (CYTO) (3/20/06). CYTO and Savient finalize exclusive distribution agreement for SOLTAMOX. Sells ownership in PSMA development joint venture to Progenics.
Poore Brothers (SNAK) (3/5/06). Hires new COO and loses Sales VP. 1st QT numbers look okay as does balance sheet.
Lipid Sciences (LIPD) (2/20/06). Gets approval to begin human clinical trial from Medstar Research Institute.
Adherex (ADH) (2/20/06). Initiates clinical proof-of-mechanism trial of Eniluracil.
Gateway (GTW) (2/5/06). A slew of releases. Most notable may be Gateway’s re-entrance into the French retail market and it’s introduction of “Big Company” services for mid-sized business customers. First QT numbers show good revenue growth but loss widens on lawsuit costs; balance sheet looks viable.
MIND C.T.I. (MNDO) (2/5/06). Quarterly preliminary results show expected record revenue of about $5.2 million.
8×8 (EGHT) (1/20/06). Inks deal with CompUSA for Packet8 virtual office small business VoIP offering.
Ceragon Networks (CRNT) (1/5/06). Wins $6 million turnkey project to expand digital network in the Philippines. Earnings results set for May 1, the day we post this Newsletter.
Castelle (CSTL) (1/5/06). Posts pretty positive first quarter numbers; balance sheet still looks good.
Digital Angel (DOC) (12/20/05). Earnings release scheduled for May 3. DOC to combat hoof-and-mouth disease in Brazil. Cattle tag sales in Argentina now exceed 1.4 million for 2006. DOC livestock tags okayed in Chili.
Fusion Telecom (FSN) (12/5/05). Files patent application for its SIP Peer-To-Peer VoIP communication.
Memory Pharmaceuticals (MEMY) (11/5/05). Provides some positive updates on MEM 3454 and MEM 1003.
Westell (WSTL) (10/20/05). CEO to retire. To present at a webinar on May 4.
RAE Systems (RAE) (10/5/05). Expands first responders choice in chemical warfare agent detection.
Discovery Partners (DPII) (10/5/05). To announce 1st QT results on May 4.
EntreMed (ENMD) (9/5/05). Panzem NCD enters clinical trial in metastatic breast cancer.
N.A. Scientific (NASI) (8/5/05). FDA grants clearance for breast cancer device.
Electric City (ELC) (7/5/05). Faces AMEX delisting unless it can increase shareholder equity. This is going on the “Endangered List” if and until the company resolves this problem.
Commerce Energy (EGR) (6/5/05). Selected by Newtown Township, OH, as preferred provider for natural gas.
Verticalnet (VERT) (4/5/05). Earnings call set for May 15. Faces NASDAQ delisting. We are places this on the Endangered List.
Loudeye (LOUD) (4/5/05). Slates 1st QT earnings call for May 9.
Advancis Pharma (AVNC) (12/20/04). Quarterly results expected May 2, the day after this Newsletter is posted. Says FDA review of Keflex is ongoing.
Applied Micro Circuits (AMCC) (11/20/04). Fourth QT and FY revenue numbers show growth but losses widen; balance sheet still appears to be very strong.
Nova Measuring (NVMI) (11/5/04). Plans to acquire privately-held Hypernex so as to expand into X-ray diffraction metrology.
Aviza (AVZA) (10/5/04). Announces shipment of Sigma fxP to Freescale Semiconductor. Sells $15 million private placement.
Network Engines (NENG) (6/5/04). Quarterly revenues beat guidance but loss widens; balance sheet still looks pretty good.
TMNG Global (TMNG) (4/20/04). Slates quarterly report for May 11.
Palatin (PTN) ((4/5/04). Completes $27 million offering.
Socket Communications (SCKT) (3/20/04). Quarterly report shows revenues up 14% sequentially; balance sheet still seems okay.
Monogram Biosciences (MGRM) (7/20/01). To present at Deutsche Bank confab on May 3 in Boston.
Our picks for this issue both trade on NASDAQ; one is a software developer and the other is a security protection firm.
KINTERA, INC. (NASDAQ: KNTA) – $1.47. Twelve-month hi-low has been $5.84 – $1.35. Based in San Diego, CA, with about 470 employees, this software developer has 36.3 million shares outstanding, $48.7 million in total current assets, $77.67 million in total assets, little debt, and $28.73 million in total liabilities. Institutional ownership is around 33%. Three analysts have the stock as a “hold” and one as a “strong sell”. http://www.kintera.org
Last year, Kintera, Inc. bled red ink, profusely. However, it had pretty good revenue growth and the balance sheet looks pretty good, also. Is it time to see more black and less red? We may get an idea when the company releases their 1stQT numbers, which should be pretty soon.
Founded in 1999, and public for over two years, Kintera provides software that enables non-profit organizations to use the Internet to raise donations, control fund-raising costs, and build awareness for their causes. It flagship product, Kintera Sphere, is managed as a single system and offered to non-profits as a service accessed with a Web browser. The organizations use this system to manage their Web sites, special events and membership, organize individuals, advocate causes, raise major gifts, deliver services and programs, and execute personalized marketing campaigns for which Kintera offers wealth profiling and screening services. These allow non-profits to identify, monitor, and rank the wealth of prospects in their data bases, as well as to edit, analyze, prioritize, and combine external data collected within its internal database.
Kintera also offers workplace giving tools that allow organizations to automate and support their workplace giving programs; an on-demand solution for donor-advised funds and wealth management products to financial institutions and money center banks; an accounting software designed for the financial management of non-profits and government entities; and various consulting services. At last count, the company boasted of having more than 15,000 accounts including the Girl Scouts, YMCA and YWCA, Earthwatch Institute, Big Brothers Big Sisters, Southern Baptist Convention, and the Arthritis Foundation.
In mid-April, Summit Trust Company signed a multi-year pact to use the Kintera Donor Advised Fund Services for gift giving. Earlier that month, the company launched Kintera Sphere v8.0 that provides a single interactive system to manage relationships.
For FY2005, ending 12/31/05, the company saw a 73% year-over-year revenue jump to $40.9 million, however, losses totaled nearly $42 million compared to FY2004 losses of $19.2 million. Kintera attributes the losses mostly to a number of non-cash items as well as infrastructure investments.
If Kintera did not have a decent looking balance sheet and a large niche client base, this would be a crap shoot because of the red ink. Actually, it just may be until the company can show it has stopped the bleeding, and we should get an indication with the next several earnings reports, one of which is due by month’s end.
Our 24-month target for the stock is $2.50 to $3.00.
For more information, contact KNTA at 866-546-8372; info@Kintera.com
TRI-S SECURITY CORPORATION (NASDAQ: TRIS) – $2.90. Twelve-month hi-low has been $6.27 – $2.61. Located in Alpharetta, GA, with about 2500 employees, this security/protection company has 3.4 million shares outstanding, $12.45 million in total current assets, $47.34 million in total assets ($15.6 million is goodwill), and $30.91 million in total liabilities, of which $11.4 million is long-term debt. Institutional ownership is almost nil. http://www.trissecurity.com
Normally when we see this much debt, we turn the page, but a recent event could propel TRI-S Security Corporation to even bigger things. Also, the company has been generating some decent revenues without too much red ink.
Founded in 2001, and public for about a year, TRIS, through its two wholly-owned subsidiaries, Paragon Systems and the Cornwall Group, provides contract guard services and equipment. This includes uniformed armed and unarmed guards for access control; personnel protection; plant security; theft prevention; surveillance; vehicular and foot patrol; crowd control; and prevention of sabotage, terrorist, and criminal activities.
Situated outside of Washington, DC, Paragon Systems primarily serves the Federal government and employs over 750 security specialists at over 50 facilities throughout the U.S. Its clients include the departments of Homeland Security and Treasury, NASA, FBI, DEA, The Social Security Administration, and the FDA. The Cornwall Group, which has five offices throughout Miami and its tri-county area, has over 1500 employees and provides security services for state and local governments as well as businesses. Some of their clients include the University of Miami, American Red Cross, Marriott Hotels, Enterprise Rent-A-Car, and the Florida Transportation Department. TRI-S is also a 10% joint partner with L3 Communications in Army Fleet Support, LLC, which provides support services at Fort Rucker in Alabama.
In early April, TRIS was awarded a $29 million five-year government contract to protect the headquarters of the Department of Homeland Security (DHS). The company will provide a range of services such as armed guards, EMTs, and monitors.
For FY2005, ending 12/31/05, revenue was $42.98 million with $2.28 million in losses compared to 2004 revenue of $25.42 million and losses of $627,000.
The recent DHS contract should enhance the revenue picture even more, and one must think that guarding DHS HQ should have a snowball effect.
Our 24-month target for the stock is $5.50 to $6.00.
For more information, contact TRIS’ Ginger Lightburn at 678-808-1540, ext. 111; gingerlightburn@trissecurity.com
Look for the May 20, 2006 Newsletter to be posted on 5/16 or 5/17.
Thank you,
George