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Hello Readers,

It’s summertime and there really is not a lot to say other than what we have been. The markets have been drifting down over the last month and we suspect this trend to continue for some time. Yes, there will be the occasional surges, but those will probably short-lived. We need to ask ourselves, “What is there to get them really refueled?” The simple answer is “not much”. Well-known financial analyst Meredith Whitney summed it up best, recently, when she said, “The economy needs to restructure and it isn’t, it is only buying time”. Buying time is never good for markets, at least over the long haul.

Here are the headlines about companies in our Current Portfolio; dates in parentheses are when we first recommended them. We are not giving updates on companies that are on the “Endangered List” unless we feel the news to be highly significant.

PDF Solutions (PDFS)(7/5/09). To release 2ndQT numbers on July 29. (SLRY)(7/5/09). Company survey says 78% of human resources departments feeling an economic impact.

USA Technologies (USAT)(6/5/09). Rights offering approved, which pushed stock price down.

Health Grades (HGRD)(5/20/09). To announce 2ndQT results on July 28.

CSP, Inc (CSPI)(4/5/09). Provides Lockheed Martin with rugged cluster computer systems to support U.S. Navy Aegis combat system.

TomoTherapy (TOMO)(2/20/09). Slates earnings call for July 30.

AuthenTec (AUTH)(2/5/09). Acquires assets of fingerprint sensor maker Atrua Technologies for $4.9 million.

MakeMusic (MMUS)(1/20/09). Monthly subscription report reflects 18% gain over prior year.

Endwave (ENWV)(1/5/09). Sets earnings call for July 28.

AXT, Inc (AXTI)(12/20/08). Earnings news slated for July 30.

Market Leader (LEDR)(12/20/08). To release earnings news August 4.

The Orchard Partners (ORCD)(11/20/08). Partners with National Lampoon and other major independent film companies.

Vimicro (VIMC)(11/5/08). Recent numbers look encouraging as company says 2ndQT revenue should improve substantially; balance sheet still looks pretty strong.

Oilsands Quest (BQI)(10/20/08). Announces delay in annual report filing and intenttion to restate financials. Provides bitumen resource estimate update and possible mining spinoff.

Akeena Solar (AKNS)(10/20/08). Sets earnings call for July 30. Converts Silver Mountain Vineyards to 100% solar energy.

SCM Microsystems (SCMM)(10/5/08). Introduces CHIPDRIVER Time Recording solutions to U.S. market.

Lexicon Pharmaceuticals (LXRX)(9/20/08). Initiates Phase 2 clinical trial of LX1032 in patients with carcinoid syndrome.

Planar Systems (PLNR)(9/20/08). Earnings call scheduled for August 4.

Endeavour Silver (EXK)(9/5/08). Gives a very upbeat production report for the 2ndQT – silver up 12%, gold up 61%, and silver-equivalents up 21%. Gives update on recent drilling activities.

Energy Focus (EFOI)(6/5/08). Announces new line of energy efficient LED parking garage fixtures for existing buildings.

Microvision (MVIS)(5/20/08). Gets $1 million contract from Lockheed Martin to develop low-profile see-through eyewear displays.

BioLase Technology (BLTI)(4/5/08). Names new CFO. Announces preliminary 2ndQT results.

Nanophase Technologies (NANX)(1/20/08). Slates shareholder meeting for July 22.

Move, Inc (MOVE)(1/5/08). To announce 2ndQT results on August 5. Names new CFO.

Sunesis Pharmaceuticals (SNSS)(11/5/07). Receives $1.5 million milestone payment from Biogen.

American Technology (ATCO)(10/5/07). Says it will report record FY 3rdQT revenues of over $4 million.

Alliance Fiber Optic (AFOP)(7/20/07). Sets earnings call for July 22.

Pharmacyclics (PCYC)(6/20/07). Sets record date for rights offering.

Oncolytics Biotech (ONCY)(6/5/07). Research collaborators present glioma reovirus research as ASV annual meeting. Completes patient enrollment in UK combination REOLYSIN and Paclitaxel/carboplatin head and neck cancer trial.

ECtel (ECTX)(5/5/07). To release 2ndQT results on August 5.

Endologix (ELGX)(1/20/07). Slates earnings call for July 22. Lazard Capital gives the stock a “buy” rating.

HealthStream (HSTM)(10/20/06). Ranks #54 on the Healthcare Infomatics 100, a list of the 100 leading global healthcare IT providers. Lippincott Williams & Wilkens’ evidence-based content now integrated in HSTM’s learning platform as company expands competency solutions.

Hydrogenics (HYGS)(9/20/06). General Motors Company acquires 11.4 million shares of HYGS from GMC. Receives going concern qualification from independent accounting firm.

The Inventure Group (SNAK)(3/5/06). Earnings release set for July 23.

8×8 (EGHT)(1/20/06). Sets earnings call for July 29.

RAE Systems (RAE)(10/5/05). Introduces new generation of fixed systems.

Nova Measuring (NVMI)(11/5/04). Metrology deployed by two flash manufacturers at Copper CMP.

Our picks for this Newsletter are another biotech and another technology outfit, both listed on NASDAQ.

VICAL, INC. (NASDAQ: VICL) – $2.60. Twelve-month hi-low has been $4.09 – $1.04. Based in San Diego, CA, with about 110 employees, this biotech has 40.4 million shares outstanding, $30.92 million in total current assets, $51.1 million in total assets, little debt, and $10.37 million in total liabilities. Institutional ownership is around 22%. Three analysts give the stock a “strong buy” and one has it on “moderate buy”.

When four analysts give a small biotech “strong” and “moderate” buys it is cause for great interest. Usually, it means that they feel a company like Vical, Inc. could have some good technologies in the hopper. It also helps that the balance sheet is half-decent.

Founded in 1987, and trading on NASDAQ for just over six years, Vical develops DNA-based vaccines and therapeutics for preventing and treating infectious diseases, cardiovascular, and cancer. These include Allovectin-7 cancer immunotherapeutic, a Phase III clinical trial product for treating metastatic melanoma; a therapeutic vaccine for cytomegalovirus, a Phase II clinical trial product to prevent viral reactivation and disease after transplant; a prophylactic vaccine called Vaxfectin for H5N1 pandemic flu virus, which completed its Phase I clinical trial to protect against infection, disease, and/or viral shedding; a prophylactic vaccine for cytomegalovirus, a preclinical status product, which prevents infection before and during pregnancy to preclude fetal transmission; and a therapeutic vaccine for Herpes Simplex 2 virus, a research status product that prevents recurring flare-ups.

Vical, through corporate collaborations, also develops Collategene angiogenic therapy encoding Hepatocyte Growth Factor that induces local growth of blood vessels to restore blood flow to limbs affected by ischemiz; angiogenic therapy encoding Hepatocyte Growth Factor, which completed a Phase I clinical trial, induces local growth of blood vessels to restore blood flow to hearts affected by ischemia; Apex-IHN prophylactic vaccine that protects farm-raised salmon from infection and disease; and a therapeutic cancer vaccine encoding human tyrosinase, used in adjunct treatment to increase survival time of dogs with oral melanoma. The company also has products in Phase I status that treat breast or prostate, colorectal, ovarian, or non-small cell lung cancer; or carcinomas of the upper GI tract, colon, kidney, or bladder.

Earlier this month, Vical got a lot of attention when it announced that its swine flu vaccine worked in mice and rabbits. At the end of June, the company received a $1.5 million milestone payment from Merck for developing a DNA-based cancer vaccine, on which Merck is conducting early-stage clinical test.

Vical is typical of a small biotech in that its revenues scanty and its losses hefty. For FY2008, ending 12/31/08, revenues were $7.95 million with $36.9 million in losses. During the 1stQT of the current FY, ending 3/31/09, revenue was $2.25 million with $8.24 million in losses.

This is a company with a lot going on and has proven that it has some products that can garner attention, both from the news media and from major pharmas.

Our 24-month target for the stock is $4.50 to $5.00

For more information, contact VICL’s Alan Engbring at 858-646-1127.

PERFORMANCE TECHNOLOGIES, INC. (NASDAQ: PTIX) – $2.88. Twelve-month hi-low has been $5.67 – $2.48. Based in Rochester, NY, with about 220 employees, this technology company has 11.1 million shares outstanding, $45.67 million in total current assets, $58.05 million in total assets, little debt, and $6.27 million in total liabilities. Institutional ownership is around 52%. One analyst gives the stock a “moderate buy”.

Many companies have stumbled this year, and Performance Technologies, Inc. is no exception. After three straight years of profits, the company saw a loss during the 1stQT of this year. So, with PTIX is near its yearly low and still owning a very good balance sheet, the stock may be worth a shot.

Founded in 1981, and public for over a dozen years, Performance Technologies, simply put, supplies Internet protocol (IP) based platforms and solutions for communications networks and computer system architectures worldwide. The company markets a line of application-ready platforms under the trade name Advanced Managed Platforms, which include Ethernet switching elements that operate as the nexus of its IP packet switching functionality, as well as the Intelligent Shelf Management, which offers the ability to manage the operation of its products within the platform. It also provides NexusWare, a Linux-based development environment that assists system engineers in integrating and developing packet-based embedded systems; communications software protocols, including X.25, Frame Relay, and SS7 and SS7/IP signaling software; and specialized packages, such as radar protocols used in weather tracking air traffic control and military communications applications.

Performance Technologies also offers SEGway signaling products, which provide a suite of signaling products that operate in circuit-switched and IP-networks to address the signaling needs of wireline and wireless service providers, value-added resellers, and OEMs. It further provides compute products, networks access products, and embedded system products. The company serves equipment manufacturers in telecommunications, data communications, aerospace and defense, and commercial markets.

For FY2008, ending 12/31/08, revenue was $40.51 million with $1.66 million in net income. During the 1stQT of the current FY, ending 3/31/09, revenue was $6.92 million with $1.43 million in losses.

The company, as we said, has been the victim of the global slowdown, but, at some point, that, too, should pass.

Our 24-month target for the stock is $5.00 to $5.75.

For more information, contact PTIX at 585-256-0200;

Look for the August 5, 2009 Newsletter to be posted on 8/3 or 8/4.

Happy 40th Moon Walk Day!

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