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Hello Readers,
During the last couple of weeks, the markets added to their August gains, albeit, with some trepidation. There seems to be a lot of investor jitters over what the Fed will do at its next meeting, slated for later this month. We suspect another rate hike, although we believe the central bank has already gone overboard, which has usually been its history. What the markets do after that may hinge upon the statement that accompanies the rate hike. And, all of this could very well help determine the outcome of the midterm elections, which should be the market’s next bugaboo.
As you can tell, we did not close any new positions over the last half month, but our Current Portfolio, while still battered from early summer’s plunge, held pretty steady, overall, and improved in many spots.
Here are the headlines since the last Newsletter about companies in the Current Portfolio. Dates in parentheses are when we first recommended them.
The SCO Group (SCOX) (8/20/06). Slates 3rd QT earnings call for September 6.
American Technology (ATCO) (8/5/06). Awarded Project Sheriff LRAD contract. Names new CEO. ATCO’s HSS Directed Sound giving voice to OfficeMax in store digital signage network.
Microvision (MVIS) (7/20/06). Launches three connectivity bar code scanning products for mobile devices and desktop computers.
NTN Buzztime (NTN) (7/5/05). Launches new multiplayer miniature golf game on its restaurant and sports bar iTV network. Names new CFO.
O2Diesel (OTD) (5/20/06). Dutton Associates gives the stock a “speculative buy” rating. Customer receives award for their use of 02 Diesel.
Kintera (KNTA) (5/5/06). To present at Roth Capital confab on September 7. Armanino McKenna partners with KNTA to provide company’s FundWare accounting solutions to nonprofit base.
Investors Capital (ICH) (4/20/06). Although company shows quarterly loss, revenue growth climbs 29% over same quarter last year; balance sheet still looks pretty good.
ThermoGenesis (KOOL) (4/5/06). Sets FY earnings call for September 7. Cord Blood Registry to use AutoXpress system; KOOL expects $4 million revenue from deal for the year.
Cytogen (CYTO) (3/20/06). Launches SOLTAMOX, which it claims is the first oral liquid formulation of hormonal therapy for breast cancer patients.
Gateway (GTW) (2/5/06). Increases power of its Notebooks with new Intel Core 2 Duo processor. Shares jump on news that a major shareholder offered to buy its retail business for $450 million and that a hedge fund has taken a 10% stake in the company.
8×8 (EGHT) (1/20/06). To present at Merriman investor confab on September 19. Partners with the Yager Network to offer Packet8 VoIP phone services. Gets NASDAQ warning over bid price. Launches new annual service plan and new referral reward program. Awarded additional VoIP technology patent.
Castelle (CSTL) (1/5/06). To enter the fax-over-IP market, which is said to be the fastest growing segment of the fax server market. Plans $1 million stock buyback, which is noble, but we think companies should be spending excess money to retool, improve technologies, acquisitions, etc.
Digital Angel (DOC) (12/20/05). To present at Kaufman Brothers investor confab on September 6.
Fusion (FSN) (12/5/05). Enters into strategic partnership with Chinese community services site.
Westell Technologies (WSTL) (10/20/05). To present at Kaufman investor confab on September 6. Subsidiary builds billing solution for in-house VoIP bridges for American Express client.
Discovery Partners (DPII) (10/5/05). Medimmune and Infinity set $500 million cancer drug deal, which gives a big boost to DPII stock price, since DPII should soon be merging with Medimmune.
Nephros (NEP( (9/20/05). Will restate results to correct stock-option expense. Receives extension to submit AMEX plan of compliance. This is looking hairy, right now.
EntreMed (ENMD) (9/5/05). Gets patent for chemical in its 2ME2 cancer drug.
N.A. Scientific (NASI) (8/5/05). Sets 3rd QT earnings call for September 7.
Innodata (INOD) (7/5/05). Plans $1 million stock buyback. Once again, a noble idea, but money could be better used elsewhere.
Verticalnet (VERT) (4/5/05). Several releases. This one is on the “Endangered List”.
B.O.S. (BOSC) (1/5/05). While quarterly results show a revenue drop, BOSC shows a profit probably due to non-product revenues; balance sheet looks so-so as company secures additional financing.
Applied Micro Circuits (AMCC) (11/20/04). Completes acquisition of Quake Technologies. Board recommends delay of shareholder meeting to September 22. Receives customer support and engineering support awards from Brocade.
TMNG Global (TMNG) (4/20/04). To present at Kaufman investor conference on September 6.
Socket Communications (SCKT) (3/20/04). Mosaic Sales Solutions increases deployment of SCKT’s SC Scan Card by 22%.
Monogram Biosciences (MGRM) (7/20/01). Company claims four studies affirm its Trofile HIV co-receptor tropism assay.
Palatin Technologies (PTN) (4/5/04). To present at the Roth Capital confab on September 6 and, again, at the Thomas Weisel healthcare conference on September 8. Our picks for this Newsletter are an instrument supplier and a communications service provider, both trading on NASDAQ.
TVI CORPORATION (NASDAQ: TVIN) – $2.20. Twelve-month hi-low has been $4.80 – $1.85. Located in Glenn Dale, MD, with about 135 employees, this instrument maker has 32.6 million shares outstanding, $18.77 million in total current assets, $39.72 million in total assets ($15.6 million is goodwill), little debt, and $2.91 million in total liabilities. Institutional ownership is around 33%. www.tvicorp.com
There are small companies with half-decent looking balance sheets and, surprise, have been consistently making money, but their stock price is low because they have not been making as much as they had been (point being that for a small company to make money at all is usually cause for celebration). Such is the case with TVI Corporation, which believe that the balance of 2006 will be better than the first half of the year.
Founded in 1977, and public for over ten years, TVI makes and markets first responder systems, which include chemical and biological decontamination systems, hospital surge capacity systems, and infection control systems, all of which integrate its fabric shelter structures. These are the same shelter systems that dotted the Gulf coast after Katrina, especially in Louisiana and Mississippi. The company offers its products to homeland security, hospitals, the military, police and fire departments, and public health agencies.
TVIN literally has dozens and dozens of products for Hazmat-type situations, such as a line of air purifying respirators, as well as thermal products, which include targets, identification friend or foe devices, helicopter landing systems, and markers and decoys. Also available are items like field hospital shelters, generators, mobile labs, lights, water pumps, portable heaters and air conditioning systems, and even a customized trailer for conducting autopsies.
Perhaps one of the reasons why TVI feels optimistic about the balance of this year is that emergency spending allocations among various government agencies may be picking up. During August alone, the company was selected to support the DOD Guardian installation protection program with a multi-year contract valued at $490,000; received a major OEM order for powered air purifying respirators valued at up to $750,000; received an order from FEMA for air purifying respirator systems worth more than $450,000; and received an order for casualty management shelter for the U.S. National Guard Bureau, also valued at $450,000. In July, the State of Florida ordered various shelter systems worth around $600,000.
For FY2005, ending 12/31/05, revenue was $32.83 million with slightly over $5 million in net income. During the first six months of the current FY, ending 6/30/06, revenue has been $16.56 million with $1.4 million in net income.
TVI is obviously a “disaster play” and with governments only beginning to really turn on the spending spigots for emergency purposes, the company should do well in the years ahead.
Our 24-month target for the stock is $3.75 to $4.00.
For more information, contact TVIN at 301-352-8800.
GOAMERICA, INC. (NASDAQ: GOAM) – $3.00. Twelve-month hi-low has been $7.65 – $2.75. Based in Hackensack, NJ, with about 30 employees, this communications service provider has 2.34 million shares outstanding, $6.78 million in total current assets, $13.42 million in total assets, little debt, and $2.15 million in total liabilities. Institutional ownership is around 2.5%. www.goamerica.com
When adding GoAmerica, Inc. to the Current Portfolio, we considered its good looking balance sheet and also its niche market, which, because of aging Boomers, show grow even more. We also liked its improved financial results and progress on some of it key technology.
Founded in 1996, and public since 2000 when the stock hit over $1200 (yes, that’s what the charts say), GoAmerica provides a range of wireless, relay and prepaid communication services customized for people who are deaf, hard-of-hearing, or speech impaired. The company also sells handheld devices. Its relay service enables deaf people/hard-of-hearing to call and converse with hearing parties by using a computer, wireless handheld device, and similar units through an operator that interprets text to voice and vice versa. The company’s wireless subscription services consist of what it calls WyndTell and WyndPower.
These Text Relay Services (TRS) are free to callers. TRS providers, such as GoAmerica, receive payment from a pool of funds, collected from phone carriers, by the FCC and administered by the National Exchange Carriers Association (NECA). Back in June, the FCC certified GOAM as an Internet protocol (IP) relay and video relay service (VRS) provider. With this certification, the company is now eligible to be paid directly from the TRS fund. Before, these funds were collected through Nordia, which took its share and then paid GoAmerica. As a result, the company should see greater revenue on future P&L statements.
During the second quarter of 2006, GoAmerica introduced i711 wireless for BlackBerry handheld and also announced that it plans to deliver a video relay solution sometime during the fourth quarter.
For FY2005, ending 12/31/05, revenue was $8.07 million with $4.37 million in net losses. During the first six months of the current FY, ending 6/30/06, revenues were $6.77 million with $1.44 million in net losses.
Granted, there really isn’t too much that is overly sexy about GOAM, but they appear to have turned some major corners in a rather vast niche market.
Our 24-month target for the stock is $5.00 to $6.00.
For more information, contact GOAM at 201-996-1717; investors@goamerica.com
Look for the September 20, 2006 Newsletter to be posted on 9/18 or 9/19.
Have a safe holiday,
George