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Hello Readers,
Since the last issue, we closed two positions, both for okay gains.
IMAGEWARE SYSTEMS (1/20/04). Closed positions 3/5/04 at $5.23 for a 59% GAIN.
MCF CORPORATION (1/20/01). Closed position 3/1/04 at $3.08 for a 54% GAIN.
Since picking ImageWare three months ago, the stock has had a pretty steady upward climb and news of a contract with a Hawaiian police department helped it even more. At one point over the last three years, MCF fell way under a dollar, but, as the markets rebounded, so did this securities dealer. On March 1, the stock went on a mild tear as the company announced the hiring new top management from big-name brokerage firms.
Last issue, we expected the bull market to soon regain momentum and roar right through Spring and into Summer. The last two weeks have been tough. Forget all the esoteric reasons why we’ve had the slump. There are only two: First, and foremost, is the uncertainty over the November elections. Next, terrorism in Spain has hit a raw nerve in the U.S. Currently, the short to mid-term fate of the markets depend upon if Bush can get traction and look better in the polls; and how soon can investors shake off terrorism jitters. Until then, expect sloppiness in the markets.
Here are the headlines since the last Newsletter about companies in the Current Portfolio. Dates in parentheses are when we first recommended them.
DOR BioPharma (DOR) (9/20/00). Converts all outstanding preferred stock into common stock. Closes $3.25 million private placement. Should give DOR some breathing room, but new shares may put more pressure on stock price.
Genetronics (GEB) (10/5/00). Engages Quintiles as its contract research organization for U.S. and European trials. Starts European clinical study for head and neck cancer to advance commercialization of the MedPulser.
Arotech (ARTX) (6/5/01). Armoring subsidiary receives new orders for over $5.5 million. End-of-year revenue numbers triple those of 2002 but losses more than double. However, backlog for first two months of 2004 now exceeds revenues for all of 2003. Other subsidiaries book about $1.02 million in total new orders.
Orthovita (VITA) (12/20/01). Expands sales operations. Coverage initiated by brokerage WR Hambrecht.
VASCO Security (VDSI) (2/5/02). Announces joint product with Netilla.
Argonaut (AGNT) (4/20/02). Expands FlashMaster flash chromatography product line with the entry-level FlashMaster Personal+system for medicinal chemistry.
Generex (GNBT) (8/5/03). Granted drug delivery patent in Australia. Working to develop diagnostic kit for early detection of Type 1 diabetes.
Cyro-Cell (CCEL) (5/5/03). End-of-year results.
Art Technology (ARTG) (8/5/03). Unveils the industry’s first-ever adaptive self-service solution.
Targeted Genetics (TGEN) (10/5/03). FY2003 numbers show a slippage in revenue but almost a 50% reduction in losses; balance sheet still appears healthy.
A.P. Pharma (APPA) (11/5/03). Reports results of a Phase 2 study. Year-end balance sheet still looks okay but could be better.
V.I. Technologies (VITX) (11/20/03). Year-end numbers show company has been able to stabilize balance sheet, for now, thanks to a series of secondary offerings
SatCon (12/5/03). Enters distributor pact with Cummins South for SATC’s Rotary UPS Systems.
Actuate (ACTU) (1/5/04). Company division delivers highly integrated Java reporting tool for BEA WebLogic workshop developers. Named “Technology Vendor of the Year” by KeyCorp. Announces support for Linux.
Oplink (OPLK) (2/20/04). Expands technology portfolio and advances foundry strategy.
Pinnacle Data (PNS) (3/5/04). Expands service offerings with Netherlands-based Kender Thijssen.
Our picks for this issue are a multimedia software provider and a network equipment provider, both trading on NASDAQ.
OPENTV CORPORATION (NASDAQ: OPTV) – $2.80. Twelve-month hi-low has been $5.34 – 70 cents. Based in San Francisco, CA, with about 440 employees, this multimedia software provider has 117.7 million shares outstanding, $84 million in total current assets, $233 million in total assets, little debt, and $65.04 million in total liabilities. Institutional ownership is around 10%. One analyst rates the stock a “strong buy”. http://www.opentv.com
Since the Net stock bubble burst in March 2000, we have chased a handful of the former high flyers that plunged to penny stock status. We had luck with some, and not so with others. OpenTV Corporation hit $185 in March 2000 and has staggered for the last four years, but, during that time, it has pretty much maintained a seemingly healthy balance sheet. By the way, the numbers up above, in the first paragraph, are as of 9/30/03. On March 16, the day this Newsletter should be posted, OPTV will be releasing end of the year financials, but we do not expect a dramatic change in the balance sheet.
Founded in 1994, OpenTV is a leading provider of the technology, content, and services that power interactive TV. The company offers a series of platforms enabling a wide variety of these services, including addressable advertising and enhanced TV services, with the potential to reach tens of millions of digital cable, satellite, and terrestrial households. Where permissible, OPTV enables remote betting solutions through its secure gaming technology. It is also able to offer advertisers research and media analysis. OpenTV is known for offering PlayJam, one of the best-known and entertaining TV games channels, and PlayMonteCarlo, a fixed-odds casino games services. In the last two years, OPTV has grown through acquisitions. In 2002, Liberty Media bought a controlling stake in the company, and shortly, thereafter, OPTV acquired Wink Communications. Then, in 2003, OPTV bought ACTV and BettingCorp.
Since the first of this year, OpenTV inked a new licensing pact with Pace Micro Technology; integrated its software with Panasonic Digital TV sets shipped in Japan; signed a definitive agreement to provide a full suite of interactive services to Foxtel; and launched PlayJam on EchoStar’s dish network.
For FY2002, ending 12/31/02, revenue was $59.68 million with net losses of $802.56 million (ugh!).
During the first nine months of FY2003, ending 9/30/03, revenues were $48.1 million with $41.22 million in losses. At least the red ink looks a little pinker.
Is OPTV a turnaround here? There seems to be a lot happening and we’re betting that the worst is behind the company.
Our 24-month target for the stock is $5.50 to $6.50.
For more information, contact OPTV at 415-962-5000; investorrelations@opentv.com
SOCKET COMMUNICATIONS, INC. (NASDAQ: SCKT) – $2.83. Twelve-month hi-low has been $4.80 – 65 cents. Located in Newark, CA, with about 55 employees, this network equipment provider has 29.3 million shares outstanding, $23.26 million in total assets and nearly $6.8 million in total liabilities. Institutional ownership is around 5.8%. http://www.socketcom.com
Lately, we have been hearing some gurus proclaiming that small techs are starting to fizzle. Maybe they’re right; maybe not. However, there are many small companies that are just getting into their groove. With a nice-looking balance sheet and four straight quarters of record revenue, Socket Communications seems to be one of them.
Founded in 1992, and public since 1995, Socket bills itself as The Mobile Connection in that it provides a broad range of connectivity products for Windows mobile-based computers, focusing on handhelds including pocket PCs, Windows CE devices, Palm PDAs, and mobile phones. The products have been designed for these devices with standard expansion slots for plug-in cards, including cards with Bluetooth wireless technology, wireless LAN cards, digital phone cards, a 56K modem card, and Ethernet cards. The expansion slots that Socket supports include CompactFlash, PC Card, and Secure Digital (SDIO). Socket products are classified into four families: network connection products, bar code scanning products, serial products, and embedded products and services.
Over the last few months, Socket has seen some product developments that could add even more revenue over the coming year or two. In February, the company was awarded a third U.S. patent covering its design for combining bar code scanning I/O and removable memory expansion solutions. Then, in January, Socket and SkyeTek inked a pact to develop a broad array of RFID products for mobile computing and handheld devices. At about the same time, the company won the Best GPS PDA Software Award from Handheld Computing Magazine (seems like there’s a magazine for just about everything). Also, in January, socket introduced its battery-powered cordless 56K modem for PDAs.
For FY2003, ending 12/31/03, revenue was $21.6 million with a net loss of $2 million compared to 2002 revenues of $16.3 million and $3.1 million in net losses.
Socket’s technology must be doing something right, since it’s hard to argue against increasing revenues and decreasing losses.
Our 24-month target for the stock is $5.50 to $6.00.
For more information, contact SCKT’s David Dunlap at 510-744-2735; dave@socketcom.com
Look for the April 5, 2004 issue to be posted on 4/1 or 4/2.
Thank you,
George