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Hello Readers,
Since the last Newsletter, we closed three positions; two for some very nice gains and one for a loss.
REPLIGEN (3/20/05). Closed position 7/27/05 at $3.35 for a 97% GAIN.
INFOSONICS (5/5/05). Closed position 7/27/05 at $4.15 for a 69% GAIN.
AROTECH (6/5/01). Closed position 7/27/05 at $1.10 for a 65% LOSS.
Ever since we picked Repligen back in March, the stock had mostly hovered on the upside. Then, last week, the company rang up higher-than expected quarterly sales and this sent the stock on a nice tear. Infosonics had also been on the plus side and soared on the same day, seemingly on some good product news. Arotech, which had been our longest running position, was placed on the “Endangered List” a few months back, and it was finally time to say goodbye.
The markets seem determined to remain in summer rally mode and that’s just fine with all of us. How long can this continue? We don’t know. Let’s just enjoy it.
Here are the headlines since the last Newsletter about companies in the Current Portfolio. Dates in parentheses are when we first recommended them.
CDC Corp (CHINA) (7/20/05). Major Netherlands seafood processor selects CDC subsidiary software for food processors. Subsidiary recognized as leading supply chain vendor by industry publication.
Centillium (CTLM) (7/20/05). Quarterly report shows slashing of losses; balance sheet still looks good. Launches Entropia III software suite.
Innodata (INOD) (7/5/05). Schedules earnings release for August 11.
TeleCommunications Systems (TSYS) (6/20/05). Adds Good Technology’s GoodLink messaging and corporate data access system. Earnings call slated for August 3. Vonage launches TCS Response Center; also selects TCS for VoIP E9-1-1 service.
Osteotech (OSTE) (6/20/05). Releases pretty upbeat quarterly report; balance sheet still looks okay. Raises revenue guidance for the rest of this year.
Commerce Energy (EGR) (6/5/05). Announces sale of investment in Turbocorp B.V. for $2 million cash.
Sirenza Microdevices (SMDI) (6/5/05). Second quarter results show return to pro forma profitability; balance sheet still looks fair. Releases new power amplifier for WiMAX 802.16 applications.
Vion Pharma (VION) (5/20/05). Initiates Phase I/II trials of CLORETAZINE (VNP40101M) in chronic lymphocytic leukemia and Richter’s Syndrome. Coverage initiated by Wedbush Morgan.
Exact Sciences (EXAS) (5/20/05). Balance sheet still looks healthy.
Optical Communication (OCPI) (4/20/05). Quarterly report still shows a profit; balance sheet still appears very strong.
Verticalnet (VERT) (4/5/05). Acquires U.K. software company.
Loudeye (LOUD) (4/5/05). Chosen by Panasonic to power end-to-end music download service. To announce 2nd QT results August 9. Strengthens relationship with Coca-Cola.
Aerhr Test Systems (AEHR) (3/20/05). Quarterly numbers so-so; balance sheet still look fair and company expects significant improvement in net sales for 1st QT of FY 2006. Wells Fargo downgrades stock.
Tumbleweed (TMWD) (3/5/05). Upgraded by CE Untergerg Towbin as quarterly net loss narrows; balance sheet still looks good.
Centra Software (CTRA) (2/20/05). Earnings call slated for August 4.
MINDSPEED (MSP) (2/20/05). Merriman Curhan Ford upgrades stock as quarterly loss narrows and company achieves high end of revenue expectations; balance sheet still looks good.
InsWeb (INSW) (1/20/05). Quarterly numbers look pretty good as company trims losses in 2nd QT; balance sheet still appears good. Launches major online insurance agent lead program.
Brillian (BRLC) (1/5/05). To release quarterly report August 4.
B.O.S. (BOSC) (1/5/05). Note holder converts BOS debt into company ordinary shares. BOS to sell its PrintBOS activity.
Advancis (AVNC) (12/20/05). Strep throat drug fails to meet end points and company trims staff by 38% to reduce costs. We’re tempted to place this on the “Endangered List” but want to see the next balance sheet first.
Applied Micro Circuits (AMCC) (11/20/04). Company delivers third consecutive quarter of revenue growth as losses narrow; balance sheet still looks very strong. Morgan Keegan downgrades stock and Forbes says AMCC lacks compelling valuation.
Nova Measuring (NVMI) (11/5/04). Sets August 4 for earnings release.
Trikon (TRKN) (10/5/04). Sells Sigma fxP to Sawtek for bulk acoustic wave manufacture. Omega fxP for silicon trench etching awarded best wafer processing tool by European semiconductor magazine.
Chordiant (CHRD) (9/20/04). Joins new Russell Microcap Index.
Tripath (TRPH) (8/5/04). Quarterly numbers do not appear great and neither does balance sheet. We had this on the “Endangered list” before but removed it on news of a deal with IBM. We’re putting it back on the “Endangered List”.
Bindview (BVEW) (6/5/04). 2nd QT numbers not bad and balance sheet still appears good. Company IT security compliance solutions selected by General Mills.
Network Engines (NENG) (6/5/04). Quarterly numbers till showing some growth lag; balance sheet still looks pretty fair.
Management Network Group (TMNG) (4/20/04). Slates earnings report for August 4.
AVI BioPharmna (AVII) (4/20/04). Reports continued success in preclincal antiviral efforts. Announces publication of SARS NEUGENE Antisense studies in Journal of Virology.
Socket Communications (SCKT) (3/20/04). Reports profitable 2nd QT; balance sheet could be a little stronger. Partners with Brandwise SSI to enhance sales force mobility.
OpenTV (OPTV) (3/20/04). Schedules earnings call for August 9.
Transgene (TRGNY) (3/5/04). Announces achievement of clinical milestone by Merck using Transgene’s proprietary technology.
Oplink (OPLK) (2/20/04). Will release 4th QT and FY numbers on August 17.
Somera(SMRA) (2/20/04). Slates earnings date for August 4.
Crossroads (CRDS) (2/5/04). Sets August 25 for earnings call. Gets okay to continue trading on NASDAQ.
Actuate (ACTU) (1/5/04). Comes out with decent numbers and profits; balance sheet still looks very good. Stock upgraded by JMP Securities. Niku renews with company.
AVANT (AVAN) (12/5/03). Reports positive Phase 2 study results for children cholera vaccine. To share $500,000 grant with Harvard Medical School.
Active Power (ACPW) (11/20/03). Releases positive quarterly report; balance sheet still looks pretty fair.
Targeted Genetics (TGEN) (10/5/03). Releases 2nd QT numbers. This one is on the “Endangered List”.
Art Technology (ARTG) (8/5/03). Names new chairman. Quarterly numbers show nice improvement from previous QT; balance sheet appears to be good. Receives 2005 CRM Excellence Award from industry publication.
ViroLogic (VLGC) (7/20/01). Reports record 2nd QT revenue and profits; balance sheet still appears to be very healthy.
Our selections for this Newsletter are another small tech and another healthcare/biotech, both trading on NASDAQ.
ZI CORPORATION (NASDAQ: ZICA) – $2.57. Twelve-month hi-low has been $8.00 – $1.96. Based in Calgary, Alberta, Canada, with about 115 employees, this telecom services provider has 46.2 million shares outstanding, $19.16 million in total current assets, $23.5 million in total assets, little debt, and $6.31 million in total liabilities. Institutional ownership is around 7.9%. One analyst has the stock as a “hold” and another as a “strong sell”. http://www.zicorp.com
Here’s another one that has been stomped due to several less-than-stellar quarters, but Zi Corporation has a fairly decent balance sheet and a few new products in the hopper that could turn things around.
Founded in 1987 as Cancom Ventures and public since 1994, Zi develops software products that provide intelligent interface solutions, primarily for text messaging for mobile and consumer devices. The company operates in two segments, namely Zi Technology and eLearning. Zi Technology’s core product is eZiText, a predictive text input solution that predicts words and/or phrases for use in messaging and other text applications in about 48 language databases. eZiText and its companion application, eZiTap, offers text input such as short messaging, email, e-commerce, and Web browsing. Through its eLearning segment, which includes Oztime, English Practice, and an equity interest in Magic Lantern Group, Zi is able to provide educational content and distribution channels to offer learning management systems, interactive online courses, and network education solutions.
In January of this year, ZICA completed the acquisition of Decuma AB of Sweden, a maker of handwriting recognition technology. The Decuma product portfolio consists of three recognition software products covering such languages as English, French, Spanish, German, Italian, and other Western languages, Chinese and Japanese. In March, Zi introduced its Qix technology that provides users a quick and easy method for accessing and discovering a phone’s full set of features without needing to remember where and how to find them via the phone’s built-in menu. During June, Zi made some important product announcements. It advanced Chinese text input with the eZiText V7 release; opened up its Chinese handwriting recognition market with download technology for the first time; and said that its eZiText has been embedded across Oswin’s smartphone portfolio.
For FY2004, ending 12/31/04, revenue was $13.4 million with $2.34 million in losses. During the 1stQT of FY2005, ending 3/31/05, revenue was $2.87 million with $1.52 million in losses; ZICA attributes much of the loss on developing the new Qix technology and the cost for the Decuma acquisition.
We should note that ZICA is shopping for a new CEO and that the Lancer Funds wants to replace the board of directors, and, needless to say, this spitting match is not helpful to the stock price. However, if and when ZICA gets through the current squabbling, the company should see better days, given the new Qix product and the Decuma acquisition.
Our 24-month target for the stock is $4.75 to $5.25.
For more information, contact ZICA’s Dale Kearns at 403-233-8875; investor@zicorp.com
NORTH AMERICAN SCIENTIFIC, INC. (NASDAQ: NASI) – $3.30. Twelve-month hi-low has been $7.85 – $1.85. Headquartered in Chatsworth, CA, with about 190 employees, this biotech has 16.4 million shares outstanding, $19 million in total current assets, $70 million in total assets (of which $28.35 million is Intangible), little debt and $12.09 million in total liabilities. Institutional ownership is around 46%. One analyst has the stock as a “strong buy” and another as a “hold”. http://www.nasi.net
Sometimes we stumble upon a small biotech with a fair balance sheet and it appears to be making the transition when the R&D turns into making real money. Some recent developments may have North American Scientific, Inc. on its way to doing just that.
Founded in 1987 and public since 1998, North American makes and sells products for the radiation oncology market; it bills itself as a single-source provider of products and technologies for diagnosing and treating cancer. The company offers intensity modulated and image guided radiation (IMRT and IGRT) products and services. NASI also offers iodine-based and palladium-based implantable brachytherapy seeds for treating prostate cancer; and it also provides a line of these seeds for use in treating ocular melanoma and other solid tumor applications. It also develops and sells products for other medical, environmental, research, and industrial applications.
NASI sells five primary IMRT/IGRT products to the radiation therapy market: CORVUS, the core of its IMRT treatment planning system; MIMIC, a multileaf collimator; PEACOCK, an integrated IMRT planning and delivery system; BAT, its IGRT product; and PEREGRINE, a radiation dosage calculation software product. The company also offers accessory products that assist in the positioning and verification of patient alignment.
Late last month, NASI entered into a five-year non-exclusive pact to supply its palladium prostate brachytherapy source to ONCURA. In early July, the company received FDA clearance to market nTRAK, its new IGRT system used to monitor and position patients during radiation therapy for head and neck cancers.
For FY2004, ending 10/31/04, revenue was $24.73 million with $36.31 million in losses. During the first six months of FY2005, ending 4/30/05, revenue was $17.3 million with $7.58 million in losses. It appears that NASI has been showing some nice revenue growth while paring its losses. We would like to see NASI increase its cash position, and, hopefully, with its new-found revenue growth, it could do just that.
Our 24-month target for the stock is $5.75 to $6.50.
For more information, contact NASI at 818-734-8600; ir@nasimedical.com
Look for the August 20, 2005 Newsletter to be posted on 8/16 or 8/17.
Thank you,
George