We can’t seem to win even when we are right. VTRO gets a take over offer and MRVC declares a huge special dividend and between the two stocks they were a net loser. Crazy market.

Some of our stocks are just stupid cheap—compared to their cash on hand. Check this list:

Cash as % of Stock Price

EXTR 57%
PTIX 66%
GRVY 181%
BVSN 146%
CCUR 90%
MTSL 51%
SIGM 65%

Plus BVSN, EXTR, RIMG, VTRO and MRVC.PK are all in “play” with activist shareholders either trying to get them to pay out special dividends or take them over.

We are now down 7.7% for the year after being down .6% last week. All of the damage for the year comes from LTUS. Hopefully this will turn around in 2012.

The DOW was up 1.4% last week, NASDAQ was down 1.1% and the S+P 500 was up 1.1%. The Russell 3000 was up 1%.

AVSO, BVSN, CCUR, EXTR, MTSL and MITL are our favorites.

For the year, the DOW is up 2%, NASDAQ is down .6%, S+P 500 is down 1.5%, the Russell 3000 is down 2.6%

Last week we went 7 stocks up, 13 down and 2 unchanged. Since inception we are now 48 stocks up and 22 down for a 69% winning percentage (80% is our target win %).

Since our beginning, we have closed out the following positions:

2006-NTCT +44%
2006-ONXS +11% (Buyout offer)
2006-DTLK +41%
2006-CAW +21% (Buyout offer)
2007-IYXI.ob +44% (Buyout offer)
2007-MOBI +47% (Buyout offer)
2007-INFT +11% (Buyout offer)
2007-RITT +62%
2007-MIVA +55%
2007-DTLK +25% (2 weeks)
2007-PDLI + 3%
2007-QADI +25%
2007-CIMT +50%
2007-BDR +19%
2007-LINN.ob -57% (mortgage business bust didn’t help here)
2007-TISA -39% (take some tax loss for 2007 due to disappointing results.
2008-ANGN +26%
2008-OPTO.ob +40% (Buy-out offer)
2008-PDLI +9% (company split, and special dividend)
2008-BDAY -39% (long overdue takeover offer-or “take-under”)
2008-DTLK +40% (third trip on this one)
2008-ILOG +26% (Buy-out offer from IBM)
2008-PARL +56%
2009-MBRK +67%
2009-SNWL +14%
2009-CYNO +25%
2009-DTLK +33%
2009-NED +46%
2009-CUTR +13%
2009-HSTM +67% (continued good earnings)
2009-RNWK +36%
2009-OPK +116%
2009-CLZR -32% (a loser even on a buy-out)
2009-DTLK +28% (our 5th profitable trip on this one)
2010-HPOL +110%
2010-DIVX +25%
2010-CHRD +37% Buyout (2 weeks after we recommended it)
2010-HPOL +30%
2010-MGIC +82%
2010-GSL +78%
2010-CCEL +49%
2010-HPOL +27%
2010-CAW EVEN (excluding 2.5 years of dividends)
2011-DWCH +116%
2011-IPAS +15%
2011-PRM +56% Buyout (1 week after we recommended it)
2011-RST +12%
2011-NINE -10%

The model portfolio assumes $10,000 invested in each stock (unless we double-up–then it is $20,000), less $10 commission each way (TD Ameritrade rate).

For the 48 stocks that we closed out since 2006 (43 were winners) the average net gain was 37%.

MRV Communications (Pink Sheets-MRVC.pk)
Valuation-$3.09
Price October 7, 2011-$1.27
Closed down $.11 at $1.19
Unbelievable. Company announces on Thursday a $75 million special dividend with a record date of October 20th, then on Friday after the market closed it changes it to November 2nd. 2.3 million shares changed hands on Friday, some as low as $1.02 assuming that they would receive the dividend based on the initial record date. We assume they will get sued on this. No one could figure out what was going on and the stock ended the day at $1.19, still down for the week. Creating shareholder value? Not. Chairman of the Board had resigned and the current CEO also resigned from the Board (but not as CEO). Two new Board members were appointed.
Down 6%

Sigma Designs Inc. (NASDAQ-SIGM)-Recommended 7/11/2011)
Buy Price-$8.49
Valuation $13.40 (Was $16.02)
Closed down $.32 at $8.26
Earnings out in August. Sales were down 23% to just under $47 million and they lost $22 million. Yuck. But it is not as bad as it seems. Cash and investments actually went up to $5.40 a share ($170 million) and if you exclude the GAAP non-cash BS and the inventory write down, the loss was “only” about $6 million. So we are trading at a market cap of about $65 million (excluding cash) for a $200 million a year chip company with 50% margins. Still pretty stupid we think. However, our valuation dived to $13.40, so we need to keep our eye on this one.
Down 3%, HOLD

Mitel Networks (NASDAQ-MITL)-Recommended 7/6/2011)
Buy Price- $3.04( Was $3.36 before $10,000 added, $3.95 before $10,000 added)
Valuation $14.04 (Was $10.39)
Closed up $.18 at $2.40
Earnings in August. Pretty good. Revenues were $164 million up from $160 million last year. Non-GAAP net income was $9.2 million or $.16 a share compared to $10.8 million and $.19 a share last year. They took a $4.8 million restructuring charge in the quarter, to they reported a loss of $2.8 million in the quarter.
Our valuation jumped to $14.04.
Down 21%, BUY

Rimage (NASDAQ-RIMG)-Recommended 5/24/2011)
Buy Price-$14.20
Valuation $25.63 (Was $26.45)
Closed down $.03 at $11.36
Next earnings due out Thursday, October 27th, before the market opens.
Well here we go. RIMG signed a deal to buy “Qumu”. Apparently Qumu is in video communications and social enterprise applications for business. They are saying it will do $15 million in revenue in 2011 and $21 million in 2012. Cost is $39 million in cash and one million shares of RIMG stock. They are projecting the combined company will generate more than 15% sales growth in 2012 and that cash flows will be about the same as 2011. Accordingly they upped the quarterly dividend to $.17 per share for a yield of around 6%.
This will leave them with about $80 million in cash, or about $7.60 a share. Not too shabby.
The market did not react kindly to this maneuver. We will hold this for a while longer. Collect the dividend, see what Arcadia does and see if they can come through on their promise of 15% growth next year.
Arcadia sent a letter to Rimage on September 12th, again asking for the $9 dividend and making vague threats of doing something. Not clear what exactly. Oust the CEO, make a tender offer are among the possibilities we guess.
Earnings out in July. Sales were off about 10% to $20.2 million and earnings were off $.10 to $.12 per share. Cash continued to rise to $119 million ($12.49 per share). Our valuation slipped a bit to $25.63 on the lower sales. With the 2.6% dividend and a huge cash cushion, we still like RIMG.
Down 20%, HOLD

Lexmark International (NYSE-LXK)-Recommended 5/24/2011)
Buy Price-$28.80
Valuation $79.12 (Was $63.99)
Closed down $.31 at $29.67
Next earnings report due out on Tuesday, October 25th before the market opens.
The International Trade Commission ruled in October in LXK’s favor banning foreign imports from 24 companies, of LXK replacement ink cartridges that infringe their patents. LXK also said they were going to start litigation for damages against these companies.
Earnings in July. They were great. They made $1.27 per share earnings on flat sales up from $1.07 in earnings last year. They are projecting $.86-$.96 in earnings for Q3. They seem easily on track to make over $4 per share this year. Our valuation soared to $79.12 per share. PE guys should be drooling over LXK. This would normally be a “buy” with such a huge discount to our valuation, but the vagaries on the stock analysts make us cautious.
Up 3%, HOLD

MER Telemanagement (NASDAQ-MTSL)-Recommended 5/17/2011)
Buy Price-$1.42 (Was $1.50 before adding another $10,000 investment)
Valuation $5.61 (Was $5.11)
Closed up $.02 at $1.24
MER announced a contract extension in August of $2.5 million (minimum). This is almost 50% of MER’s entire market cap.
Earnings in August. Not bad. Sales were just over $3 million and they made over $200,000 or $.05 a share. For the six months they have made $.08 a share (untaxed of course). So MTSL is trading at about 8X untaxed annualized earnings. Oh yeah, they have $.63 a share in cash also (up from $.60 last quarter). Our valuation jumped to $5.61 per share.
Down 13% BUY

Harris Interactive (NASDAQ-HPOL)-Recommended 3/3/2010)
Buy Price-$.92
Valuation $3.31 (Was $2.63, $2.97)
Closed at $.49, down $.01
Next earnings report due out Tuesday, November 1st before the market open.
Earnings in October. Interesting. Sales were actually up over last year by 4% to $45.2 million, margins dropped a bit to 34% and excluding a $4.2 million restructuring charge, they only lost $859,000. Net cash was a positive $.06 a share—the highest since 2008. Our valuation moved up to $3.31 a share but this increased is due to the fact that the June quarter is a seasonally high quarter. Still it is higher than last years $3.15 valuation.
Down 47%, HOLD

Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)
Buy Price-$5.08
Valuation $14.04 (was $18.54, $15.99)
Closed down $.37 at $4.38
Next earnings report due out Tuesday, November 1st, after the market close.
Earnings out in August. Sales were down to $15.1 million from $17.3 million and they lost $1.353 million or $.16 a share. Cash per share rose to $3.95 from $3.41. Not a great quarter, but not horrible with the cash rise. Our valuation fell to $14.04-still more than double the current price, and with a huge cash cushion.
In April the company announced that it would not do the stock buy back that Skellig was suggesting. We don’t like buy backs anyway. Hopefully Skellig will keep pushing management to get the share price up. Their ownership is up to 5.86%.
Down 14%, BUY

Astex Pharmaceuticals Inc. (Was SuperGen Inc.) (NASDAQ-ASTX)-Recommended 10/4/2010)
Buy Price-$2.31 (was $2.09 before adding $10,000)
Valuation $3.11 (was $5.21, $4.89, $4.37, $3.48)
Closed up $.09 at $1.89
Earnings out in July. Despite that the quarter results did not include the results of Astex, they provided good guidance of what the second half’s combined results will be. For the latest quarter, revenue rose to $11.7 million from $9.9 million last year and they made $.01 a share versus $.02 last year. This quarter’s results included $1.3 million of expenses related to the merger. So all in all, it was a good quarter. However, our valuation based on this quarter fell to $3.11 as revenues declined from the prior quarters $17 million.
As we suspected, the merger with the revenue poor Astex will hurt our valuation which does not take into account the massive drug pipeline of Astex. It is not easy to find a small drug company that has a pile of cash, is not losing a ton of money and is trading at even close to our valuation.
There are $2 BILLION of potential milestone payments down the road.
Down 18%, HOLD

Performance Technology (PTIX-Recommended 3/30/2010)
Buy Price-$2.70
Valuation $4.87-(was $4.99, $3.79, $3.87, $5.03, $5.98, $7.13)
Closed up $.09 at $1.85
Earnings out in August. Sales up 15% to $8.5 million and they made $300,000 on a non-GAAP basis. Not bad at all. Cash is $1.23 a share and our valuation fell a tad to $4.87
We think we will hold on to this one a bit longer and see if they can get to a consistent profit.
Down 32%, HOLD

Extreme Networks (EXTR-Recommended 3/22/2010)
Buy Price-$3.18 (Was $3.04 before adding another $10,000)
Valuation-$6.45 (was $5.67, $7.36, $7.23, $7.31, $6.82, $6.81)
Closed down $.19 at $2.80
Next earnings due out on Wednesday, November 2nd, after the market close.
Earnings out in August. Sales rose about 5% from last year to $89 million and they lost $2 million or $.02 a share after about $4 million of non-cash charges. Cash stayed at about $147 million or $1.59 per share. Our valuation moved back up to $6.45 a share.
Big news in July. EXTR announced they are laying off 16% of their employees and expect $20 million of cost reductions in FY 2012 and allow the company to make consistent double digit operating income. We view this all as good news for the future. Starboard was cleared to buy up to 15% of EXTR as disclosed in an SEC filing in June.
Starboard Value Fund filed another 13D/A in June disclosing that they had upped their stake again to 9.6%.
Down 12%, BUY

Broadvision (BVSN-Recommended 3/16/2010)
Buy Price-$10.84 (Was $13.50 before double up)
Valuation $18.01-(was $21.21, $22.95, $22.31, $21.77, $23.37, $27.15)
$13.14 per share in cash.
Closed down $.83 at $8.99
Now trading $4.15 below cash value. Nuts.
Next earnings report due out Wednesday, October 26th, at 1:30 pm PST.
Palo Alto Investors filed a 13g/a in October showing a 6.3% stake, down from 16.7%, so these are the sellers that drove the stock down to the mid $8 level.
Marlin Capital Investment filed a 13D in October saying that they sent a letter to the company on October 4th saying they wanted to buy the company. Whoo hoo! They bought 248,000 shares on September 16th (at $8.50 a share) as reported in their Form 13g in September. Finally somebody has noticed how cheap this is!
Earnings in July. Not so hot. Sales were down to $4 million (from $5.1 million last quarter), and they lost $1.5 million. Cash per share fell to $13.14. Clearly their social networking initiative has not taken hold yet. This is still trading like a Chinese stock, but it is a U.S. company and it trading at less than cash value. Our valuation however fell to $18.01. Without the fact that BVSN is trading at less than cash, we would likely sell BVSN but will hold on another quarter or two and see if they can produce some decent results.
Down 17%, BUY

Gravity Company Ltd. (GRVY-Recommended 1/18/2010)
Buy Price- $1.45 (Was $1.68 before double up)
Valuation $5.33-(Was $5.61, $5.73, $4.38, $4.44, $5.15)
Closed down $.09 at $1.16
Now trading at $.94 less than cash value. And they are profitable.
June quarterly earnings out in August. Revenues were just under $14 million and they made $.06 a share. Only fly in the ointment was that Ragnarok 2 is delayed until at least Q1 2012. Cash per share rose to $2.10.
Our valuation fell a bit to $5.33 on some margin compression, but at less than cash value and 22% of our valuation this is one good lottery ticket if they ever release Ragnarok 2.
Down 20%, HOLD

AEterna Zentaris (AEZS-Recommended 6/20/2009)
Buy price $1.42 (was $1.78 before adding another $10,000, $1.82 before double up)
Valuation –Speculation.
Closed up $.02 at $1.50
Earnings announced in August. Revenues were up about $900,000 to $6.5 million and their operating loss was about $8 million (compared to $15 million loss last year). AEZS has been diligently selling shares under their announced programs and have about $53 million in cash (but close to 100 million shares outstanding). This is pretty normal for a developing drug company.
Speculative for sure.
Up 5%, HOLD

Spectranetics (SPNC-Recommended 9/2/2006)
Buy price $5.68 (was $8.90, $9.40 before adding $10,000, and was $10.65 before double up),
Valuation –$10.00
Closed down $.05 at $7.25
Next earnings due out Wednesday October 26th, before the market opens.
Earnings out in July. Sales rose 7% to $32.2 million and they actually managed a $.02 profit. Cash rose to $35.7 million.
SPNC announced recently that they finally hired a new CEO. He comes from DaVita, but we were not all that impressed with his resume. I hope he is planning on making a big killing on his stock options at SPNC and not just continuing to screw up like the other current and previous management.
Paragon filed a 13D/A in May disclosing they had upped their stake to 7%.
Up 28%, HOLD

Mediware (MEDW-Recommended 6/4/2007)
Buy Price $6.33, (was $6.52, $6.67 ($10,000 added), $6.98 after double up)
Valuation $18.34 (was $16.07, $15.04, $14.23, $15.02, $14.35, $12.13, $12.57, $12.29, $11.90, $11.30, $11.48, $11.47 $10.99, $10.28, $13.32, $12.89, $13.40)
Closed down $.11 at $11.35
Earnings out in September. Revenues up 20% and EPS more than doubled to $.25 a share. Cash remained at $3.66 a share and our valuation jumped to $18.34.
Constellation resumed selling in early September.
We give up on the sale of the company anytime soon.
Constellation Software owns 21.8%, but put itself up for sale this year. Should have bought Constellation stock, it has tripled since they got into MEDW!
All we read is that medical records will be a hot area, so MEDW looks like the place to be.
Up 79%, HOLD

Vertro (VTRO (was-MIVA)-Recommended 10/21/2007)
Buy Price $8.15 (Was $11.90 before adding another $20,000, $13.10 before another $10,000 and was $15.00 before double up),
Valuation $10.91 (was $12.42, $14.23, $14.76, $12.40, $12.55, $10.85, $8.25, $9.45, $28.05, $32.10, $34.20, $37.90, $37.95)
Closed up $.18 at $1.79
Well the take over finally happened. Inuvo (AMEX–INUV) announced on Monday they had agreed to buy VTRO in an all stock deal. The price is 1.546 shares of INUV for each share of VTRO. INUV was $1.75 when the deal was announced indicating a value of $2.71, but INUV shares fell to $1.35 making the value about $2.08. INUV has about $50 million in sales, 40% gross margins and is slightly EBITDA positive. Maybe 1 and 1 can make 3 here. Our valuation of INUV is $4.32. VTRO’s largest shareholder filed a 13D/a indicating he is not happy with this deal and included calculations indicating that VTRO could return $3.38-$4.39 a share to shareholders on a liquidation of the company.
Earnings announced in August. Not great. Sales were down $1 million from last year to $7.5 million and they lost $300,000 ($.05 per share).
Should have sold this when it traded over $6. Our valuation fell to $10.91 and cash per share fell to $.67.
Down 78% HOLD

Angeion Corporation (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $13.13 (was $13.19, $13.60, $15.00, $13.06, $12.15, $11.29, $11.73, $11.47, $11.16, $9.53, $13.30, $13.03)
Closed down $.20 at $4.50
CEO bought 10,000 shares in September at $4.25. Good sign.
Earnings in August. Another lackluster quarter. Sales fell from $7.1 million to $6.8 million and they lost $81,000 or $.02 a share. Our valuation fell slightly to $13.13 and cash was $2.39 per share. If this company could just show a bit of growth I think we would see $10 in short order—if.
Blueline Partners still owns 7.6% of ANGN and ought to be pushing on the company to do something about the stock price.
Up 18%, BUY

OB-abies (Bulletin Board Listed Stocks)

As proven by OPTIO, patience is necessary with these stocks.

ARI Networks (ARIS.ob-Recommended 8/19/2006)
Buy price $1.61 (Was $1.78 before another $10,000 added, was $2.06 before double up),
Valuation $5.65 (was $5.39, $4,86, $5.60, $5.73, $5.54, $5.74, $5.96, $4.72, $5.19, $5.66, $5.63, $5.61, $5.71, $5.49, $5.34, $5.03, $5.28, $5.28, $5.21)
Closed at $..66 down $.25
ARIS announced last week that they had engaged a PR firm, saying their stock was undervalued and the business had great opportunities ahead. Stock fell.
Next earnings due out Monday, October 31st, after the market closes.
ARIS filed an 8k in September with presentation materials for a “potential investor”. They talk about how they think their shares are undervalued. There may be some life here.
Earnings out in June. Sales were flat at $5.354 million, operating income however jumped to $675,000 from $297,000 and they made $.07 per share (about $.04 excluding non-recurring and discontinued operations). Our valuation jumped back up to $5.65 on higher than expected margins. If they can maintain $.04 per quarter (fully taxed), we should be on our way to having a winner here.
Wake up management–you have a great little company here worth 6X what it is selling for.
Now down 59%, BUY, Still a Huge valuation gap here.

Rand Worldwide (RWWI.ob (Was Avatech, AVSO.ob)-Bought November 28, 2005)
Buy price $.79 (Was $.93, $.99 and $1.19 before adding $10,000-each time),
Valuation $2.12 (was $2.60, $2.40, $1.90, $2.26 $3.07, $3.03, $2.38, $2.57, $2.81, $2.78, $3.30, $3.76, $4.00 $3.41, $3.05, $2.53, $3.25, $3.29 $2.69, $3.36, $3.81)
Stock closed at $.77, up $.02
Earnings out in October. Not bad. Revenues were $23.3 million and they made $.01 per share. For the year they ended up with revenues of $89.2 million, 47% gross margins and they made $1.8 million or $.03 a share, after $1.9 million of one-time merger expenses. Not bad for a company with a market cap of $39 million. Our valuation dropped to $2.12 a share on the seasonal drop in revenues. Still more than 2X the current price.
Down 3%, HOLD

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $1.23 (Was $.91, $1.21, $.71, $.83, $.88 $.96, $.93, $.75, $.85, $1.57, $1.40, $1.29, $1.38, $1.31, $1.38, $1.29, $1.42, $1.28 $1.13, $1.05, $.82)
Ask price $.105, closed at $.09.
CEO bought more shares in September, about 40,000 in total.
One of CTI’s directors bought 254,000 shares in August and the CEO bought 38,000 more. Finally, some trading activity!
Earnings announced in August. Not bad at all. .Revenues increased from $3.578 million to $4 million and they only lost $.01 per share. The good news is that they got a $7 million prepayment on a big U.K. order and were able to pay off all their debt and end up with $4.65 million in net cash. This is $.16 a share—double the current trading price. VOIP revenues more than doubled to $461,000 from $197,000 last year and almost doubled from $246,000 last quarter. VOIP still lost $545,000 but the loss was $100,000 less than last year. Our valuation spiked back up to $1.23.
At a $2.5 million market cap, this is stupidly cheap. Their intellectual property is probably worth 10 times this price. They need to liquefy this value somehow.
They might have to sell or shut this VOIP business down in our opinion. Just losing too much money, and eroding shareholder value–or it could be a home run.
Still an “undercover” company and stock.
Down 61%. HOLD

Lotus Pharmaceuticals (LTUS.ob-Recommended 12/3/2007)
Buy price $1.68 (Was $1.80 before $10,000 adder, $2.16 before double-up)
Valuation-$1.05 (Was $2.43, $4.11, $4.84, $4.98, $4.60, $3.82, $4.00, $3.68, $3.12, $3.98, $4.44, $3.22, $2.12, $4.56, $4.16)
Closed at $.35, down $.02.
Last earnings report in August. Sales were down $200,000 to $18.7 million and they made $.06 a share compared to $.24 last year. Our valuation plunged to $1.05 per share on margin and income declines. Gross margins fell to 26% from 48% last year. We are now worried for the first time that with the decline in net income, that they may be having liquidity issues with all of their capital commitments. If this is going to work, it won’t be until 2012 that we see anything.
Down 78%, HOLD

Bad week for us, only up 1.3%

Some of our stocks are just stupid cheap—compared to their cash on hand. Check this list:

Cash as % of Stock Price
RIMG 110%
EXTR 53%
PTIX 70%
GRVY 168%
BVSN 134%
CCUR 83%
MTSL 52%
SIGM 63%

Plus BVSN, EXTR, RIMG are all in “play” with activist shareholders either trying to get them to pay out special dividends or take them over.

We are now down 7.0% for the year. All of the damage comes from LTUS. Hopefully this will turn around in 2012.

The DOW was up 4.9% last week, NASDAQ was up 7.6% and the S+P 500 was up 6%. The Russell 3000 was up 6.3%.

AVSO, BVSN, CCUR, EXTR, MTSL and MITL are our favorites.

For the year, the DOW is up .6%, NASDAQ is up .6%, S+P 500 is down 2.6%, the Russell 3000 is down 3.6%

Last week we went 14 stocks up, 7 down and 1 unchanged. Since inception we are now 50 stocks up and 20 down for a 71% winning percentage (80% is our target win %).

Since our beginning, we have closed out the following positions:

2006-NTCT +44%
2006-ONXS +11% (Buyout offer)
2006-DTLK +41%
2006-CAW +21% (Buyout offer)
2007-IYXI.ob +44% (Buyout offer)
2007-MOBI +47% (Buyout offer)
2007-INFT +11% (Buyout offer)
2007-RITT +62%
2007-MIVA +55%
2007-DTLK +25% (2 weeks)
2007-PDLI + 3%
2007-QADI +25%
2007-CIMT +50%
2007-BDR +19%
2007-LINN.ob -57% (mortgage business bust didn’t help here)
2007-TISA -39% (take some tax loss for 2007 due to disappointing results.
2008-ANGN +26%
2008-OPTO.ob +40% (Buy-out offer)
2008-PDLI +9% (company split, and special dividend)
2008-BDAY -39% (long overdue takeover offer-or “take-under”)
2008-DTLK +40% (third trip on this one)
2008-ILOG +26% (Buy-out offer from IBM)
2008-PARL +56%
2009-MBRK +67%
2009-SNWL +14%
2009-CYNO +25%
2009-DTLK +33%
2009-NED +46%
2009-CUTR +13%
2009-HSTM +67% (continued good earnings)
2009-RNWK +36%
2009-OPK +116%
2009-CLZR -32% (a loser even on a buy-out)
2009-DTLK +28% (our 5th profitable trip on this one)
2010-HPOL +110%
2010-DIVX +25%
2010-CHRD +37% Buyout (2 weeks after we recommended it)
2010-HPOL +30%
2010-MGIC +82%
2010-GSL +78%
2010-CCEL +49%
2010-HPOL +27%
2010-CAW EVEN (excluding 2.5 years of dividends)
2011-DWCH +116%
2011-IPAS +15%
2011-PRM +56% Buyout (1 week after we recommended it)
2011-RST +12%
2011-NINE -10%

The model portfolio assumes $10,000 invested in each stock (unless we double-up–then it is $20,000), less $10 commission each way (TD Ameritrade rate).

For the 48 stocks that we closed out since 2006 (43 were winners) the average net gain was 37%.

MRV Communications (Pink Sheets-MRVC.pk)
Valuation-$3.09
Price October 7, 2011-$1.27
Closed up $.03 at $1.30
Up 2%

Sigma Designs Inc. (NASDAQ-SIGM)-Recommended 7/11/2011)
Buy Price-$8.49
Valuation $13.40 (Was $16.02)
Closed up $.76 at $8.58
Earnings out in August. Sales were down 23% to just under $47 million and they lost $22 million. Yuck. But it is not as bad as it seems. Cash and investments actually went up to $5.40 a share ($170 million) and if you exclude the GAAP non-cash BS and the inventory write down, the loss was “only” about $6 million. So we are trading at a market cap of about $65 million (excluding cash) for a $200 million a year chip company with 50% margins. Still pretty stupid we think. However, our valuation dived to $13.40, so we need to keep our eye on this one.
Up 1%, HOLD

Mitel Networks (NASDAQ-MITL)-Recommended 7/6/2011)
Buy Price- $3.04( Was $3.36 before $10,000 added, $3.95 before $10,000 added)
Valuation $14.04 (Was $10.39)
Closed up $.06 at $2.22
Earnings in August. Pretty good. Revenues were $164 million up from $160 million last year. Non-GAAP net income was $9.2 million or $.16 a share compared to $10.8 million and $.19 a share last year. They took a 44.8 million restructuring charge in the quarter, to they reported a loss of $2.8 million in the quarter.
Our valuation jumped to $14.04.
Down 27%, BUY

Rimage (NASDAQ-RIMG)-Recommended 5/24/2011)
Buy Price-$14.20
Valuation $25.63 (Was $26.45)
Closed down $1.44 at $11.39
Well here we go. RIMG signed a deal to buy “Qumu”. Apparently Qumu is in video communications and social enterprise applications for business. They are saying it will do $15 million in revenue in 2011 and $21 million in 2012. Cost is $39 million in cash and one million shares of RIMG stock. They are projecting the combined company will generate more than 15% sales growth in 2012 and that cash flows will be about the same as 2011. Accordingly they upped the quarterly dividend to $.17 per share for a yield of around 6%.
This will leave them with about $80 million in cash, or about $7.60 a share. Not too shabby.
The market did not react kindly to this maneuver. The deal was supposed to close within 24 HOURS of the announcement. Talk about a shotgun wedding. It has yet to be seen how Arcadia will react.
We will hold this for a while longer. Collect the dividend, see what Arcadia does and see if they can come through on their promise of 15% growth next year.
Arcadia sent a letter to Rimage on September 12th, again asking for the $9 dividend and making vague threats of doing something. Not clear what exactly. Oust the CEO, make a tender offer are among the possibilities we guess.
Earnings out in July. Sales were off about 10% to $20.2 million and earnings were off $.10 to $.12 per share. Cash continued to rise to $119 million ($12.49 per share). Our valuation slipped a bit to $25.63 on the lower sales. With the 2.6% dividend and a huge cash cushion, we still like RIMG.
Down 20%, HOLD

Lexmark International (NYSE-LXK)-Recommended 5/24/2011)
Buy Price-$28.80
Valuation $79.12 (Was $63.99)
Closed up $1.06 at $29.88
This is why we don’t like big cap stocks followed by analysts. JP Morgan downgraded LXK last week to underweight. Who cares what a bank thinks. They can’t even figure out mortgages.
Next earnings report due out on Tuesday, October 25th before the market opens.
The International Trade Commission ruled last week in LXK’s favor banning foreign imports from 24 companies, of LXK replacement ink cartridges that infringe their patents. LXK also said they were going to start litigation for damages against these companies. No matter, stock went down anyway.
Earnings in July. They were great. They made $1.27 per share earnings on flat sales up from $1.07 in earnings last year. They are projecting $.86-$.96 in earnings for Q3. They seem easily on track to make over $4 per share this year. Our valuation soared to $79.12 per share. PE guys should be drooling over LXK. This would normally be a “buy” with such a huge discount to our valuation, but the vagaries on the stock analysts make us cautious.
Up 4%, HOLD

MER Telemanagement (NASDAQ-MTSL)-Recommended 5/17/2011)
Buy Price-$1.42 (Was $1.50 before adding another $10,000 investment)
Valuation $5.61 (Was $5.11)
Closed down $.10 at $1.22
MER announced a contract extension in August of $2.5 million (minimum). This is almost 50% of MER’s entire market cap.
Earnings in August. Not bad. Sales were just over $3 million and they made over $200,000 or $.05 a share. For the six months they have made $.08 a share (untaxed of course). So MTSL is trading at about 8X untaxed annualized earnings. Oh yeah, they have $.63 a share in cash also (up from $.60 last quarter). Our valuation jumped to $5.61 per share.
Down 14% BUY

Harris Interactive (NASDAQ-HPOL)-Recommended 3/3/2010)
Buy Price-$.92
Valuation $3.31 (Was $2.63, $2.97)
Closed at $.50, up $.20
Wild week last week. The stock got as low as $.27 on Monday and traded 3 million shares on Monday and Tuesday before spiking back to $.63 on Wednesday. Mill Road Capital took the opportunity to buy another 500,000 shares at the low and now have a 8.8% stake (just under 4.9 million shares).
Earnings in October. Interesting. Sales were actually up over last year by 4% to $45.2 million, margins dropped a bit to 34% and excluding a $4.2 million restructuring charge, they only lost $859,000. Net cash was a positive $.06 a share—the highest since 2008. Our valuation moved up to $3.31 a share but this increased is due to the fact that the June quarter is a seasonally high quarter. Still it is higher than last years $3.15 valuation.
Down 46%, HOLD

Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)
Buy Price-$5.08
Valuation $14.04 (was $18.54, $15.99)
Closed up $.20 at $4.75
Earnings out in August. Sales were down to $15.1 million from $17.3 million and they lost $1.353 million or $.16 a share. Cash per share rose to $3.95 from $3.41. Not a great quarter, but not horrible with the cash rise. Our valuation fell to $14.04-still more than double the current price, and with a huge cash cushion.
In April the company announced that it would not do the stock buy back that Skellig was suggesting. We don’t like buy backs anyway. Hopefully Skellig will keep pushing management to get the share price up. Their ownership is up to 5.86%.
Down 7%, BUY

Astex Pharmaceuticals Inc. (Was SuperGen Inc.) (NASDAQ-ASTX)-Recommended 10/4/2010)
Buy Price-$2.31 (was $2.09 before adding $10,000)
Valuation $3.11 (was $5.21, $4.89, $4.37, $3.48)
Closed down $.13 at $1.80
Earnings out in July. Despite that the quarter results did not include the results of Astex, they provided good guidance of what the second half’s combined results will be. For the latest quarter, revenue rose to $11.7 million from $9.9 million last year and they made $.01 a share versus $.02 last year. This quarter’s results included $1.3 million of expenses related to the merger. So all in all, it was a good quarter. However, our valuation based on this quarter fell to $3.11 as revenues declined from the prior quarters $17 million.
As we suspected, the merger with the revenue poor Astex will hurt our valuation which does not take into account the massive drug pipeline of Astex. It is not easy to find a small drug company that has a pile of cash, is not losing a ton of money and is trading at even close to our valuation.
There are $2 BILLION of potential milestone payments down the road.
Down 22%, HOLD

Performance Technology (PTIX-Recommended 3/30/2010)
Buy Price-$2.70
Valuation $4.87-(was $4.99, $3.79, $3.87, $5.03, $5.98, $7.13)
Closed up $.08 at $1.76
Earnings out in August. Sales up 15% to $8.5 million and they made $300,000 on a non-GAAP basis. Not bad at all. Cash is $1.23 a share and our valuation fell a tad to $4.87
We think we will hold on to this one a bit longer and see if they can get to a consistent profit.
Down 35%, HOLD

Extreme Networks (EXTR-Recommended 3/22/2010)
Buy Price-$3.18 (Was $3.04 before adding another $10,000)
Valuation-$6.45 (was $5.67, $7.36, $7.23, $7.31, $6.82, $6.81)
Closed up $.35 at $2.99
Earnings out in August. Sales rose about 5% from last year to $89 million and they lost $2 million or $.02 a share after about $4 million of non-cash charges. Cash stayed at about $147 million or $1.59 per share. Our valuation moved back up to $6.45 a share.
Big news in July. EXTR announced they are laying off 16% of their employees and expect $20 million of cost reductions in FY 2012 and allow the company to make consistent double digit operating income. We view this all as good news for the future. Starboard was cleared to buy up to 15% of EXTR as disclosed in an SEC filing in June.
Starboard Value Fund filed another 13D/A in June disclosing that they had upped their stake again to 9.6%.
Down 6%, BUY

Broadvision (BVSN-Recommended 3/16/2010)
Buy Price-$10.84 (Was $13.50 before double up)
Valuation $18.01-(was $21.21, $22.95, $22.31, $21.77, $23.37, $27.15)
$13.14 per share in cash.
Closed up $.42 at $9.82
Now trading $3.94 below cash value. Nuts.
Palo Alto Investors filed a 13g/a in October showing a 6.3% stake, down from 16.7%, so these are the sellers that drove the stock down to the mid $8 level.
Marlin Capital Investment filed a 13D last week saying that they sent a letter to the company on October 4th saying they wanted to buy the company. Whoo hoo! They bought 248,000 shares on September 16th (at $8.50 a share) as reported in their Form 13g in September. Finally somebody has noticed how cheap this is!
Earnings in July. Not so hot. Sales were down to $4 million (from $5.1 million last quarter), and they lost $1.5 million. Cash per share fell to $13.14. Clearly their social networking initiative has not taken hold yet. This is still trading like a Chinese stock, but it is a U.S. company and it trading at less than cash value. Our valuation however fell to $18.01. Without the fact that BVSN is trading at less than cash, we would likely sell BVSN but will hold on another quarter or two and see if they can produce some decent results.
Down 9%, BUY

Gravity Company Ltd. (GRVY-Recommended 1/18/2010)
Buy Price- $1.45 (Was $1.68 before double up)
Valuation $5.33-(Was $5.61, $5.73, $4.38, $4.44, $5.15)
Closed down $.03 at $1.25
Now trading at $.85 less than cash value. And they are profitable.
June quarterly earnings out in August. Revenues were just under $14 million and they made $.06 a share. Only fly in the ointment was that Ragnarok 2 is delayed until at least Q1 2012. Cash per share rose to $2.10.
Our valuation fell a bit to $5.33 on some margin compression, but at less than cash value and 30% of our valuation this is one good lottery ticket if they ever release Ragnarok 2.
Down 14%, HOLD

AEterna Zentaris (AEZS-Recommended 6/20/2009)
Buy price $1.42 (was $1.78 before adding another $10,000, $1.82 before double up)
Valuation –Speculation.
Closed down $.09 at $1.48
Some “analyst” did a statistical study on cancer drugs developed by sub $200 million market cap companies and found that none of them were successful. So AEZS went down. This is a speculation, but even the Chicago Cubs may win the World Series some day. There could never be a man on the moon either, until there was.
Earnings announced in August. Revenues were up about $900,000 to $6.5 million and their operating loss was about $8 million (compared to $15 million loss last year). AEZS has been diligently selling shares under their announced programs and have about $53 million in cash (but close to 100 million shares outstanding). This is pretty normal for a developing drug company.
Speculative for sure.
Up 4%, HOLD

Spectranetics (SPNC-Recommended 9/2/2006)
Buy price $5.68 (was $8.90, $9.40 before adding $10,000, and was $10.65 before double up),
Valuation –$10.00
Closed up $.36 at $7.30
SPNC got mentioned as a merger candidate in the next 12 months. We’ll see. New CEO will have to avoid all the stupid mistakes of previous management (most of them still with the company) and get the growth going again.
Earnings out in July. Sales rose 7% to $32.2 million and they actually managed a $.02 profit. Cash rose to $35.7 million.
SPNC announced recently that they finally hired a new CEO. He comes from DaVita, but we were not all that impressed with his resume. I hope he is planning on making a big killing on his stock options at SPNC and not just continuing to screw up like the other current and previous management.
Paragon filed a 13D/A in May disclosing they had upped their stake to 7%.
Up 29%, HOLD

Mediware (MEDW-Recommended 6/4/2007)
Buy Price $6.33, (was $6.52, $6.67 ($10,000 added), $6.98 after double up)
Valuation $18.34 (was $16.07, $15.04, $14.23, $15.02, $14.35, $12.13, $12.57, $12.29, $11.90, $11.30, $11.48, $11.47 $10.99, $10.28, $13.32, $12.89, $13.40)
Closed up $.05 at $11.46
Earnings out in September. Revenues up 20% and EPS more than doubled to $.25 a share. Cash remained at $3.66 a share and our valuation jumped to $18.34.
Constellation resumed selling in early September.
We give up on the sale of the company anytime soon.
Constellation Software owns 21.8%, but put itself up for sale this year. Should have bought Constellation stock, it has tripled since they got into MEDW!
All we read is that medical records will be a hot area, so MEDW looks like the place to be.
Up 81%, HOLD

Vertro (VTRO (was-MIVA)-Recommended 10/21/2007)
Buy Price $8.15 (Was $11.90 before adding another $20,000, $13.10 before another $10,000 and was $15.00 before double up),
Valuation $10.91 (was $12.42, $14.23, $14.76, $12.40, $12.55, $10.85, $8.25, $9.45, $28.05, $32.10, $34.20, $37.90, $37.95)
Closed up $.14 at $1.61
VTRO announced in September that their new homepage was generating 30% higher revenue per install. They needed some good news here.
Earnings announced in August. Not great. Sales were down $1 million from last year to $7.5 million and they lost $300,000 ($.05 per share).
Should have sold this when it traded over $6. Our valuation fell to $10.91 and cash per share fell to $.67.
Down 80% HOLD

Angeion Corporation (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $13.13 (was $13.19, $13.60, $15.00, $13.06, $12.15, $11.29, $11.73, $11.47, $11.16, $9.53, $13.30, $13.03)
Closed up $.18 at $4.70
CEO bought 10,000 shares in September at $4.25. Good sign.
Earnings in August. Another lackluster quarter. Sales fell from $7.1 million to $6.8 million and they lost $81,000 or $.02 a share. Our valuation fell slightly to $13.13 and cash was $2.39 per share. If this company could just show a bit of growth I think we would see $10 in short order—if.
Blueline Partners still owns 7.6% of ANGN and ought to be pushing on the company to do something about the stock price.
Up 23%, BUY

OB-abies (Bulletin Board Listed Stocks)

As proven by OPTIO, patience is necessary with these stocks.

ARI Networks (ARIS.ob-Recommended 8/19/2006)
Buy price $1.61 (Was $1.78 before another $10,000 added, was $2.06 before double up),
Valuation $5.65 (was $5.39, $4,86, $5.60, $5.73, $5.54, $5.74, $5.96, $4.72, $5.19, $5.66, $5.63, $5.61, $5.71, $5.49, $5.34, $5.03, $5.28, $5.28, $5.21)
Closed at $.91 up $.03
ARIS filed an 8k in September with presentation materials for a “potential investor”. They talk about how they think their shares are undervalued. There may be some life here.
Earnings out in June. Sales were flat at $5.354 million, operating income however jumped to $675,000 from $297,000 and they made $.07 per share (about $.04 excluding non-recurring and discontinued operations). Our valuation jumped back up to $5.65 on higher than expected margins. If they can maintain $.04 per quarter (fully taxed), we should be on our way to having a winner here.
Wake up management–you have a great little company here worth 6X what it is selling for.
Now down 44%, BUY, Still a Huge valuation gap here.

Rand Worldwide (RWWI.ob (Was Avatech, AVSO.ob)-Bought November 28, 2005)
Buy price $.79 (Was $.93, $.99 and $1.19 before adding $10,000-each time),
NEW Valuation $2.12 (was $2.60, $2.40, $1.90, $2.26 $3.07, $3.03, $2.38, $2.57, $2.81, $2.78, $3.30, $3.76, $4.00 $3.41, $3.05, $2.53, $3.25, $3.29 $2.69, $3.36, $3.81)
Stock closed at $.75, down $.02
Earnings out in October. Not bad. Revenues were $23.3 million and they made $.01 per share. For the year they ended up with revenues of $89.2 million, 47% gross margins and they made $1.8 million or $.03 a share, after $1.9 million of one-time merger expenses. Not bad for a company with a market cap of $39 million. Our valuation dropped to $2.12 a share on the seasonal drop in revenues. Still more than 2X the current price.
Down 6%, HOLD

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $1.23 (Was $.91, $1.21, $.71, $.83, $.88 $.96, $.93, $.75, $.85, $1.57, $1.40, $1.29, $1.38, $1.31, $1.38, $1.29, $1.42, $1.28 $1.13, $1.05, $.82)
Ask price $.105, closed at $.09.
CEO bought more shares in September, about 40,000 in total.
One of CTI’s directors bought 254,000 shares in August and the CEO bought 38,000 more. Finally, some trading activity!
Earnings announced in August. Not bad at all. .Revenues increased from $3.578 million to $4 million and they only lost $.01 per share. The good news is that they got a $7 million prepayment on a big U.K. order and were able to pay off all their debt and end up with $4.65 million in net cash. This is $.16 a share—double the current trading price. VOIP revenues more than doubled to $461,000 from $197,000 last year and almost doubled from $246,000 last quarter. VOIP still lost $545,000 but the loss was $100,000 less than last year. Our valuation spiked back up to $1.23.
At a $2.5 million market cap, this is stupidly cheap. Their intellectual property is probably worth 10 times this price. They need to liquefy this value somehow.
They might have to sell or shut this VOIP business down in our opinion. Just losing too much money, and eroding shareholder value–or it could be a home run.
Still an “undercover” company and stock.
Down 61%. HOLD

Lotus Pharmaceuticals (LTUS.ob-Recommended 12/3/2007)
Buy price $1.68 (Was $1.80 before $10,000 adder, $2.16 before double-up)
Valuation-$1.05 (Was $2.43, $4.11, $4.84, $4.98, $4.60, $3.82, $4.00, $3.68, $3.12, $3.98, $4.44, $3.22, $2.12, $4.56, $4.16)
Closed at $.37, down $.03.
Last earnings report in August. Sales were down $200,000 to $18.7 million and they made $.06 a share compared to $.24 last year. Our valuation plunged to $1.05 per share on margin and income declines. Gross margins fell to 26% from 48% last year. We are now worried for the first time that with the decline in net income, that they may be having liquidity issues with all of their capital commitments. If this is going to work, it won’t be until 2012 that we see anything.
Down 78%, HOLD

MRV Communications (Pink Sheets-MRVC.pk)
Valuation-$3.09
Price October 7, 2011-$1.27

We are not giving up on our methodology of finding cheap stock that have a catalyst.
MRV has $.94 a share in net cash, 44% gross margins and about $280 million in annual sales.

Their last quarter sales were up 19% from the prior year to about $68 million and they had an operating profit of $3.6 million versus a profit of $1.7 million. They did have a $3.2 million hickey from discontinued operations (2 units that they have sold), that put them into a net reported loss.

On September 1st, 2011, Lloyd Miller and Karen Singer filed a joint 13D disclosing a combined 5.3% ownership interest. On August 8th 2011, another “group filed a 13D with a 8.6% interest. They want MRV to pay out $120 million in a special dividend (about $.75 a share) and get relisted on NASDAQ. Raging Capital also owns 5.8% and is pushing for the special dividend.

We were extremely pleased with another “Singer” investment-Evolving Systems. Telecom seems to be their expertise.

With $150 million in cash (74% of the current market cao) and trading at 41% of our valuation, we think this is a BUY.

Average trading volume is about 300,000 shares a day. There are about 160 million shares outstanding.

MRV Communications, Inc.
MRV Communications, Inc. is a leading global provider of carrier Ethernet, WDM optical transport, infrastructure management equipment and solutions, as well as network integration and managed services. MRV’s solutions enable the delivery and provisioning of next-generation optical transport and carrier Ethernet services over any fiber infrastructure. MRV provides equipment and services worldwide to telecommunications service providers, enterprises, and governments, enabling network evolution and increasing efficiency, while reducing complexity and costs. Through its subsidiaries, MRV operates R&D centers in North America and Europe, along with support centers and sales offices around the world.

Bad week for us, down 1.8%

Some of our stocks are just stupid cheap—compared to their cash on hand. Check this list:

Cash as % of Stock Price
RIMG 97%
EXTR 60%
PTIX 73%
GRVY 164%
BVSN 140%
CCUR 87%
MTSL 48%
SIGM 69%

Plus RIMG, EXTR, CCUR and BVSN are all in “play” with activist shareholders either trying to get them to pay out special dividends or take them over.

We are now down 8.3% for the year.

The DOW was up 1.7% last week, NASDAQ was up 2.7% and the S+P 500 was down 2.1%. The Russell 3000 was up 2.2%.

AVSO, BVSN, CCUR, EXTR, RIMG, MTSL and MITL are our favorites.

For the year, the DOW is down 4.1%, NASDAQ is down 6.5%, S+P 500 is down 8.1%, the Russell 3000 is down 9.3%

Last week we went 7 stocks up, 12 down and 2 unchanged. Since inception we are now 48 stocks up and 23 down for a 70% winning percentage (80% is our target win %).

Since our beginning, we have closed out the following positions:

2006-NTCT +44%
2006-ONXS +11% (Buyout offer)
2006-DTLK +41%
2006-CAW +21% (Buyout offer)
2007-IYXI.ob +44% (Buyout offer)
2007-MOBI +47% (Buyout offer)
2007-INFT +11% (Buyout offer)
2007-RITT +62%
2007-MIVA +55%
2007-DTLK +25% (2 weeks)
2007-PDLI + 3%
2007-QADI +25%
2007-CIMT +50%
2007-BDR +19%
2007-LINN.ob -57% (mortgage business bust didn’t help here)
2007-TISA -39% (take some tax loss for 2007 due to disappointing results.
2008-ANGN +26%
2008-OPTO.ob +40% (Buy-out offer)
2008-PDLI +9% (company split, and special dividend)
2008-BDAY -39% (long overdue takeover offer-or “take-under”)
2008-DTLK +40% (third trip on this one)
2008-ILOG +26% (Buy-out offer from IBM)
2008-PARL +56%
2009-MBRK +67%
2009-SNWL +14%
2009-CYNO +25%
2009-DTLK +33%
2009-NED +46%
2009-CUTR +13%
2009-HSTM +67% (continued good earnings)
2009-RNWK +36%
2009-OPK +116%
2009-CLZR -32% (a loser even on a buy-out)
2009-DTLK +28% (our 5th profitable trip on this one)
2010-HPOL +110%
2010-DIVX +25%
2010-CHRD +37% Buyout (2 weeks after we recommended it)
2010-HPOL +30%
2010-MGIC +82%
2010-GSL +78%
2010-CCEL +49%
2010-HPOL +27%
2010-CAW EVEN (excluding 2.5 years of dividends)
2011-DWCH +116%
2011-IPAS +15%
2011-PRM +56% Buyout (1 week after we recommended it)
2011-RST +12%
2011-NINE -10%

The model portfolio assumes $10,000 invested in each stock (unless we double-up–then it is $20,000), less $10 commission each way (TD Ameritrade rate).

For the 48 stocks that we closed out since 2006 (43 were winners) the average net gain was 37%.

Sigma Designs Inc. (NASDAQ-SIGM)-Recommended 7/11/2011)
Buy Price-$8.49
Valuation $13.40 (Was $16.02)
Closed down $.02 at $7.82
Earnings out in August. Sales were down 23% to just under $47 million and they lost $22 million. Yuck. But it is not as bad as it seems. Cash and investments actually went up to $5.40 a share ($170 million) and if you exclude the GAAP non-cash BS and the inventory write down, the loss was “only” about $6 million. So we are trading at a market cap of about $65 million (excluding cash) for a $200 million a year chip company with 50% margins. Still pretty stupid we think. However, our valuation dived to $13.40, so we need to keep our eye on this one.
Down 8%, HOLD

Mitel Networks (NASDAQ-MITL)-Recommended 7/6/2011)
Buy Price- $3.04( Was $3.36 before $10,000 added, $3.95 before $10,000 added)
Valuation $14.04 (Was $10.39)
Closed up $.04 at $2.16
Earnings in August. Pretty good. Revenues were $164 million up from $160 million last year. Non-GAAP net income was $9.2 million or $.16 a share compared to $10.8 million and $.19 a share last year. They took a 44.8 million restructuring charge in the quarter, to they reported a loss of $2.8 million in the quarter.
Our valuation jumped to $14.04.
Down 29%, BUY

Rimage (NASDAQ-RIMG)-Recommended 5/24/2011)
Buy Price-$14.20
Valuation $25.63 (Was $26.45)
Closed up $.18 at $12.83
Yield here is 3.2% and cash is 99% of its market cap.
Arcadia is pushing again. They sent a letter to Rimage on September 12th, again asking for the $9 dividend and making vague threats of doing something. Not clear what exactly. Oust the CEO, make a tender offer are among the possibilities we guess.
Earnings out in July. Sales were off about 10% to $20.2 million and earnings were off $.10 to $.12 per share. Cash continued to rise to $119 million ($12.49 per share). Our valuation slipped a bit to $25.63 on the lower sales. With the 2.6% dividend and a huge cash cushion, we still like RIMG.
Their activist shareholder Arcadia Capital Management sent a letter to the Board in July, suggesting that RIMG should pay out a $9 per share special dividend, and not waste it on some stupid acquisition. We would take the dividend—or a buy-out.
Down 10%, HOLD

Lexmark International (NYSE-LXK)-Recommended 5/24/2011)
Buy Price-$28.80
Valuation $79.12 (Was $63.99)
Closed up $1.89 at $28.82
The International Trade Commission ruled last week in LXK’s favor banning foreign imports from 24 companies, of LXK replacement ink cartridges that infringe their patents. LXK also said they were going to start litigation for damages against these companies. No matter, stock went down anyway.
Earnings in July. They were great. They made $1.27 per share earnings on flat sales up from $1.07 in earnings last year. They are projecting $.86-$.96 in earnings for Q3. They seem easily on track to make over $4 per share this year. Our valuation soared to $79.12 per share. PE guys should be drooling over LXK. This would normally be a “buy” with such a huge discount to our valuation, but the vagaries on the stock analysts make us cautious.
Up .4%, HOLD

MER Telemanagement (NASDAQ-MTSL)-Recommended 5/17/2011)
Buy Price-$1.42 (Was $1.50 before adding another $10,000 investment)
Valuation $5.61 (Was $5.11)
Closed down $.05 at $1.32
MER announced a contract extension in August of $2.5 million (minimum). This is almost 50% of MER’s entire market cap.
Earnings in August. Not bad. Sales were just over $3 million and they made over $200,000 or $.05 a share. For the six months they have made $.08 a share (untaxed of course). So MTSL is trading at about 8X untaxed annualized earnings. Oh yeah, they have $.63 a share in cash also (up from $.60 last quarter). Our valuation jumped to $5.61 per share.
Down 7% BUY

Harris Interactive (NASDAQ-HPOL)-Recommended 3/3/2010)
Buy Price-$.92
Valuation $3.31 (Was $2.63, $2.97)
Closed at $.30, down $.19
Earnings in October. Interesting. Sales were actually up over last year by 4% to $45.2 million, margins dropped a bit to 34% and excluding a $4.2 million restructuring charge, they only lost $859,000. Net cash was a positive $.06 a share—the highest since 2008. Our valuation moved up to $3.31 a share but this increased is due to the fact that the June quarter is a seasonally high quarter. Still it is higher than last years $3.15 valuation.
Down 67%, HOLD

Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)
Buy Price-$5.08
Valuation $14.04 (was $18.54, $15.99)
Closed down $1.04 at $4.55
Earnings out in August. Sales were down to $15.1 million from $17.3 million and they lost $1.353 million or $.16 a share. Cash per share rose to $3.95 from $3.41. Not a great quarter, but not horrible with the cash rise. Our valuation fell to $14.04-still more than double the current price, and with a huge cash cushion.
In April the company announced that it would not do the stock buy back that Skellig was suggesting. We don’t like buy backs anyway. Hopefully Skellig will keep pushing management to get the share price up. Their ownership is up to 5.86%.
Down 10%, BUY

Astex Pharmaceuticals Inc. (Was SuperGen Inc.) (NASDAQ-ASTX)-Recommended 10/4/2010)
Buy Price-$2.31 (was $2.09 before adding $10,000)
Valuation $3.11 (was $5.21, $4.89, $4.37, $3.48)
Closed up $.01 at $1.93
Earnings out in July. Despite that the quarter results did not include the results of Astex, they provided good guidance of what the second half’s combined results will be. For the latest quarter, revenue rose to $11.7 million from $9.9 million last year and they made $.01 a share versus $.02 last year. This quarter’s results included $1.3 million of expenses related to the merger. So all in all, it was a good quarter. However, our valuation based on this quarter fell to $3.11 as revenues declined from the prior quarters $17 million.
As we suspected, the merger with the revenue poor Astex will hurt our valuation which does not take into account the massive drug pipeline of Astex. It is not easy to find a small drug company that has a pile of cash, is not losing a ton of money and is trading at even close to our valuation.
There are $2 BILLION of potential milestone payments down the road.
Down 16%, HOLD

Performance Technology (PTIX-Recommended 3/30/2010)
Buy Price-$2.70
Valuation $4.87-(was $4.99, $3.79, $3.87, $5.03, $5.98, $7.13)
Closed down $.26 at $1.68
Earnings out in August. Sales up 15% to $8.5 million and they made $300,000 on a non-GAAP basis. Not bad at all. Cash is $1.23 a share and our valuation fell a tad to $4.87
We think we will hold on to this one a bit longer and see if they can get to a consistent profit.
Down 38%, HOLD

Extreme Networks (EXTR-Recommended 3/22/2010)
Buy Price-$3.18 (Was $3.04 before adding another $10,000)
Valuation-$6.45 (was $5.67, $7.36, $7.23, $7.31, $6.82, $6.81)
Closed down $.01 at $2.64
Earnings out in August. Sales rose about 5% from last year to $89 million and they lost $2 million or $.02 a share after about $4 million of non-cash charges. Cash stayed at about $147 million or $1.59 per share. Our valuation moved back up to $6.45 a share.
Big news in July. EXTR announced they are laying off 16% of their employees and expect $20 million of cost reductions in FY 2012 and allow the company to make consistent double digit operating income. We view this all as good news for the future. Starboard was cleared to buy up to 15% of EXTR as disclosed in an SEC filing in June.
Starboard Value Fund filed another 13D/A in June disclosing that they had upped their stake again to 9.6%.
Down 17%, BUY

Broadvision (BVSN-Recommended 3/16/2010)
Buy Price-$10.84 (Was $13.50 before double up)
Valuation $18.01-(was $21.21, $22.95, $22.31, $21.77, $23.37, $27.15)
$13.14 per share in cash.
Closed up $.69 at $9.40
Now trading $4.36 below cash value. Nuts.
Marlin Capital Investment filed a 13D last week saying that they sent a letter to the company on October 4th saying they wanted to buy the company. Whoo hoo! They bought 248,000 shares on September 16th (at $8.50 a share) as reported in their Form 13g in September. Finally somebody has noticed how cheap this is!
Earnings in July. Not so hot. Sales were down to $4 million (from $5.1 million last quarter), and they lost $1.5 million. Cash per share fell to $13.14. Clearly their social networking initiative has not taken hold yet. This is still trading like a Chinese stock, but it is a U.S. company and it trading at less than cash value. Our valuation however fell to $18.01. Without the fact that BVSN is trading at less than cash, we would likely sell BVSN but will hold on another quarter or two and see if they can produce some decent results.
Down 13%, BUY

Gravity Company Ltd. (GRVY-Recommended 1/18/2010)
Buy Price- $1.45 (Was $1.68 before double up)
Valuation $5.33-(Was $5.61, $5.73, $4.38, $4.44, $5.15)
Closed unchanged at $1.28
Now trading at $.82 less than cash value. And they are profitable.
June quarterly earnings out in August. Revenues were just under $14 million and they made $.06 a share. Only fly in the ointment was that Ragnarok 2 is delayed until at least Q1 2012. Cash per share rose to $2.10.
Our valuation fell a bit to $5.33 on some margin compression, but at less than cash value and 30% of our valuation this is one good lottery ticket if they ever release Ragnarok 2.
Down 24%, HOLD

AEterna Zentaris (AEZS-Recommended 6/20/2009)
Buy price $1.42 (was $1.78 before adding another $10,000, $1.82 before double up)
Valuation –Speculation.
Closed up $.05 at $1.57
AEZS announced positive Phase 2 results for AEZS 108 in September. Didn’t seem to matter to investors and we actually lost $.05.
Earnings announced in August. Revenues were up about $900,000 to $6.5 million and their operating loss was about $8 million (compared to $15 million loss last year). AEZS has been diligently selling shares under their announced programs and have about $53 million in cash (but close to 100 million shares outstanding). This is pretty normal for a developing drug company.
Speculative for sure.
Up 10%, HOLD

Spectranetics (SPNC-Recommended 9/2/2006)
Buy price $5.68 (was $8.90, $9.40 before adding $10,000, and was $10.65 before double up),
Valuation –$10.00
Closed down $.20 at $6.94
Earnings out in July. Sales rose 7% to $32.2 million and they actually managed a $.02 profit. Cash rose to $35.7 million.
SPNC announced recently that they finally hired a new CEO. He comes from DaVita, but we were not all that impressed with his resume. I hope he is planning on making a big killing on his stock options at SPNC and not just continuing to screw up like the other current and previous management.
Paragon filed a 13D/A in May disclosing they had upped their stake to 7%.
Up 22%, HOLD

Mediware (MEDW-Recommended 6/4/2007)
Buy Price $6.33, (was $6.52, $6.67 ($10,000 added), $6.98 after double up)
Valuation $18.34 (was $16.07, $15.04, $14.23, $15.02, $14.35, $12.13, $12.57, $12.29, $11.90, $11.30, $11.48, $11.47 $10.99, $10.28, $13.32, $12.89, $13.40)
Closed down $.03 at $11.41
Earnings out in September. Revenues up 20% and EPS more than doubled to $.25 a share. Cash remained at $3.66 a share and our valuation jumped to $18.34.
Constellation resumed selling in early September.
We give up on the sale of the company anytime soon.
Constellation Software owns 21.8%, but put itself up for sale this year. Should have bought Constellation stock, it has tripled since they got into MEDW!
All we read is that medical records will be a hot area, so MEDW looks like the place to be.
Up 80%, HOLD

Vertro (VTRO (was-MIVA)-Recommended 10/21/2007)
Buy Price $8.15 (Was $11.90 before adding another $20,000, $13.10 before another $10,000 and was $15.00 before double up),
Valuation $10.91 (was $12.42, $14.23, $14.76, $12.40, $12.55, $10.85, $8.25, $9.45, $28.05, $32.10, $34.20, $37.90, $37.95)
Closed down $.29 at $1.47
VTRO announced in September that their new homepage was generating 30% higher revenue per install. They needed some good news here.
Earnings announced in August. Not great. Sales were down $1 million from last year to $7.5 million and they lost $300,000 ($.05 per share).
Should have sold this when it traded over $6. Our valuation fell to $10.91 and cash per share fell to $.67.
Down 82% HOLD

Angeion Corporation (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $13.13 (was $13.19, $13.60, $15.00, $13.06, $12.15, $11.29, $11.73, $11.47, $11.16, $9.53, $13.30, $13.03)
Closed down $.03 at $4.52
CEO bought 10,000 shares in September at $4.25. Good sign.
Earnings in August. Another lackluster quarter. Sales fell from $7.1 million to $6.8 million and they lost $81,000 or $.02 a share. Our valuation fell slightly to $13.13 and cash was $2.39 per share. If this company could just show a bit of growth I think we would see $10 in short order—if.
Blueline Partners still owns 7.6% of ANGN and ought to be pushing on the company to do something about the stock price.
Up 18%, BUY

OB-abies (Bulletin Board Listed Stocks)

As proven by OPTIO, patience is necessary with these stocks.

ARI Networks (ARIS.ob-Recommended 8/19/2006)
Buy price $1.61 (Was $1.78 before another $10,000 added, was $2.06 before double up),
Valuation $5.65 (was $5.39, $4,86, $5.60, $5.73, $5.54, $5.74, $5.96, $4.72, $5.19, $5.66, $5.63, $5.61, $5.71, $5.49, $5.34, $5.03, $5.28, $5.28, $5.21)
Closed at $.88 down $.10
ARIS filed an 8k in September with presentation materials for a “potential investor”. They talk about how they think their shares are undervalued. There may be some life here.
Earnings out in June. Sales were flat at $5.354 million, operating income however jumped to $675,000 from $297,000 and they made $.07 per share (about $.04 excluding non-recurring and discontinued operations). Our valuation jumped back up to $5.65 on higher than expected margins. If they can maintain $.04 per quarter (fully taxed), we should be on our way to having a winner here.
Wake up management–you have a great little company here worth 6X what it is selling for.
Now down 45%, BUY, Still a Huge valuation gap here.

Rand Worldwide (RWWI.ob (Was Avatech, AVSO.ob)-Bought November 28, 2005)
Buy price $.79 (Was $.93, $.99 and $1.19 before adding $10,000-each time),
Valuation $2.12 (was $2.60, $2.40, $1.90, $2.26 $3.07, $3.03, $2.38, $2.57, $2.81, $2.78, $3.30, $3.76, $4.00 $3.41, $3.05, $2.53, $3.25, $3.29 $2.69, $3.36, $3.81)
Stock closed at $.77, down $.02
Earnings out last week. Not bad. Revenues were $23.3 million and they made $.01 per share. For the year they ended up with revenues of $89.2 million, 47% gross margins and they made $1.8 million or $.03 a share, after $1.9 million of one-time merger expenses. Not bad for a company with a market cap of $39 million. Our valuation dropped to $2.12 a share on the seasonal drop in revenues. Still more than 2X the current price.
Down 3%, HOLD

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $1.23 (Was $.91, $1.21, $.71, $.83, $.88 $.96, $.93, $.75, $.85, $1.57, $1.40, $1.29, $1.38, $1.31, $1.38, $1.29, $1.42, $1.28 $1.13, $1.05, $.82)
Ask price $.105, closed at $.09.
CEO bought more shares in September, about 40,000 in total.
One of CTI’s directors bought 254,000 shares in August and the CEO bought 38,000 more. Finally, some trading activity!
Earnings announced in August. Not bad at all. .Revenues increased from $3.578 million to $4 million and they only lost $.01 per share. The good news is that they got a $7 million prepayment on a big U.K. order and were able to pay off all their debt and end up with $4.65 million in net cash. This is $.16 a share—double the current trading price. VOIP revenues more than doubled to $461,000 from $197,000 last year and almost doubled from $246,000 last quarter. VOIP still lost $545,000 but the loss was $100,000 less than last year. Our valuation spiked back up to $1.23.
At a $2.5 million market cap, this is stupidly cheap. Their intellectual property is probably worth 10 times this price. They need to liquefy this value somehow.
They might have to sell or shut this VOIP business down in our opinion. Just losing too much money, and eroding shareholder value–or it could be a home run.
Still an “undercover” company and stock.
Down 61%. HOLD

Lotus Pharmaceuticals (LTUS.ob-Recommended 12/3/2007)
Buy price $1.68 (Was $1.80 before $10,000 adder, $2.16 before double-up)
Valuation-$1.05 (Was $2.43, $4.11, $4.84, $4.98, $4.60, $3.82, $4.00, $3.68, $3.12, $3.98, $4.44, $3.22, $2.12, $4.56, $4.16)
Closed at $.40, up $.02.
Last earnings report in August. Sales were down $200,000 to $18.7 million and they made $.06 a share compared to $.24 last year. Our valuation plunged to $1.05 per share on margin and income declines. Gross margins fell to 26% from 48% last year. We are now worried for the first time that with the decline in net income, that they may be having liquidity issues with all of their capital commitments. If this is going to work, it won’t be until 2012 that we see anything.
Down 76%, HOLD

Well the third quarter ended with a thud.

Good week for us, up .9%, but a bad week for NASDAQ, which was down 2.7%.

Note that Interactive Brokers imposed new margin requirements that recently went into effect. This forced selling could continue to hit Monday morning, but we don’t think any impact will last. They raised their margin requirements to 100% on stocks trading with a market cap under $250 million. This has had some extra impact on small cap stocks on top of the lousy market. They also did this to Chinese stocks (including our LTUS) in April of this year.

Some of our stocks are just stupid cheap—compared to their cash on hand. Check the list in our posting of 9/2/2011.

We were up .9% last week and are now down 6.5% for the year.

The DOW was up 1.3% last week, NASDAQ was down 2.7% and the S+P 500 was down .4%. The Russell 3000 was down 2.2%.

AVSO, BVSN, CCUR, EXTR, RIMG, MTSL and MITL are our favorites.

For the year, the DOW is down 5.7%, NASDAQ is down 9%, S+P 500 is down 10%, the Russell 3000 is down a whopping 12.5%

Last week we went 10 stocks up, 8 down and 2 unchanged. Since inception we are now 48 stocks up and 23 down for a 70% winning percentage (80% is our target win %).

Since our beginning, we have closed out the following positions:

2006-NTCT +44%
2006-ONXS +11% (Buyout offer)
2006-DTLK +41%
2006-CAW +21% (Buyout offer)
2007-IYXI.ob +44% (Buyout offer)
2007-MOBI +47% (Buyout offer)
2007-INFT +11% (Buyout offer)
2007-RITT +62%
2007-MIVA +55%
2007-DTLK +25% (2 weeks)
2007-PDLI + 3%
2007-QADI +25%
2007-CIMT +50%
2007-BDR +19%
2007-LINN.ob -57% (mortgage business bust didn’t help here)
2007-TISA -39% (take some tax loss for 2007 due to disappointing results.
2008-ANGN +26%
2008-OPTO.ob +40% (Buy-out offer)
2008-PDLI +9% (company split, and special dividend)
2008-BDAY -39% (long overdue takeover offer-or “take-under”)
2008-DTLK +40% (third trip on this one)
2008-ILOG +26% (Buy-out offer from IBM)
2008-PARL +56%
2009-MBRK +67%
2009-SNWL +14%
2009-CYNO +25%
2009-DTLK +33%
2009-NED +46%
2009-CUTR +13%
2009-HSTM +67% (continued good earnings)
2009-RNWK +36%
2009-OPK +116%
2009-CLZR -32% (a loser even on a buy-out)
2009-DTLK +28% (our 5th profitable trip on this one)
2010-HPOL +110%
2010-DIVX +25%
2010-CHRD +37% Buyout (2 weeks after we recommended it)
2010-HPOL +30%
2010-MGIC +82%
2010-GSL +78%
2010-CCEL +49%
2010-HPOL +27%
2010-CAW EVEN (excluding 2.5 years of dividends)
2011-DWCH +116%
2011-IPAS +15%
2011-PRM +56% Buyout (1 week after we recommended it)
2011-RST +12%
2011-NINE -10%

The model portfolio assumes $10,000 invested in each stock (unless we double-up–then it is $20,000), less $10 commission each way (TD Ameritrade rate).

For the 48 stocks that we closed out since 2006 (43 were winners) the average net gain was 37%.

Sigma Designs Inc. (NASDAQ-SIGM)-Recommended 7/11/2011)
Buy Price-$8.49
Valuation $13.40 (Was $16.02)
Closed down $.15 at $7.84
Earnings out in August. Sales were down 23% to just under $47 million and they lost $22 million. Yuck. But it is not as bad as it seems. Cash and investments actually went up to $5.40 a share ($170 million) and if you exclude the GAAP non-cash BS and the inventory write down, the loss was “only” about $6 million. So we are trading at a market cap of about $65 million (excluding cash) for a $200 million a year chip company with 50% margins. Still pretty stupid we think. However, our valuation dived to $13.40, so we need to keep our eye on this one.
Down 8%, HOLD

Mitel Networks (NASDAQ-MITL)-Recommended 7/6/2011)
Buy Price- $3.04( Was $3.36 before $10,000 added, $3.95 before $10,000 added)
Valuation $14.04 (Was $10.39)
Closed down $.43 at $2.12
Earnings in August. Pretty good. Revenues were $164 million up from $160 million last year. Non-GAAP net income was $9.2 million or $.16 a share compared to $10.8 million and $.19 a share last year. They took a 44.8 million restructuring charge in the quarter, to they reported a loss of $2.8 million in the quarter.
Our valuation jumped to $14.04.
Down 30%, BUY

Rimage (NASDAQ-RIMG)-Recommended 5/24/2011)
Buy Price-$14.20
Valuation $25.63 (Was $26.45)
Closed down $.60 at $12.65
Yield here is 3.2% and cash is 99% of its market cap.
Arcadia is pushing again. They sent a letter to Rimage on September 12th, again asking for the $9 dividend and making vague threats of doing something. Not clear what exactly. Oust the CEO, make a tender offer are among the possibilities we guess.
Earnings out in July. Sales were off about 10% to $20.2 million and earnings were off $.10 to $.12 per share. Cash continued to rise to $119 million ($12.49 per share). Our valuation slipped a bit to $25.63 on the lower sales. With the 2.6% dividend and a huge cash cushion, we still like RIMG.
Their activist shareholder Arcadia Capital Management also sent a letter to the Board in July, suggesting that RIMG should pay out a $9 per share special dividend, and not waste it on some stupid acquisition. We would take the dividend—or a buy-out.
Down 11%, HOLD

Lexmark International (NYSE-LXK)-Recommended 5/24/2011)
Buy Price-$28.80
Valuation $79.12 (Was $63.99)
Closed down $1.00 at $27.03
The International Trade Commission ruled last week in LXK’s favor banning foreign imports from 24 companies, of LXK replacement ink cartridges that infringe their patents. LXK also said they were going to start litigation for damages against these companies. No matter, stock went down anyway.
Earnings in July. They were great. They made $1.27 per share earnings on flat sales up from $1.07 in earnings last year. They are projecting $.86-$.96 in earnings for Q3. They seem easily on track to make over $4 per share this year. Our valuation soared to $79.12 per share. PE guys should be drooling over LXK. This would normally be a “buy” with such a huge discount to our valuation, but the vagaries on the stock analysts make us cautious.
Down 6%, HOLD

MER Telemanagement (NASDAQ-MTSL)-Recommended 5/17/2011)
Buy Price-$1.42 (Was $1.50 before adding another $10,000 investment)
Valuation $5.61 (Was $5.11)
Closed up $.14 at $1.37
MER announced a contract extension in August of $2.5 million (minimum). This is almost 50% of MER’s entire market cap.
Earnings in August. Not bad. Sales were just over $3 million and they made over $200,000 or $.05 a share. For the six months they have made $.08 a share (untaxed of course). So MTSL is trading at about 8X untaxed annualized earnings. Oh yeah, they have $.63 a share in cash also (up from $.60 last quarter). Our valuation jumped to $5.61 per share.
Down 4% BUY

Harris Interactive (NASDAQ-HPOL)-Recommended 3/3/2010)
Buy Price-$.92
NEW Valuation $3.31 (Was $2.63, $2.97)
Earnings last week. Interesting. Sales were actually up over last year by 4% to $45.2 million, margins dropped a bit to 34% and excluding a $4.2 million restructuring charge, they only lost $859,000. Net cash was a positive $.06 a share—the highest since 2008. Our valuation moved up to $3.31 a share but this increase is mostly due to the fact that the June quarter is a seasonally high quarter. Still it is higher than last years $3.15 valuation. No one was impressed as the stock fell.
Closed at $.62, down $.05

Our valuation fell to $2.63 per share, still 4X the current price.
Down 33%, HOLD

Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)
Buy Price-$5.08
Valuation $14.04 (was $18.54, $15.99)
Closed up $.19 at $5.59
Earnings out in August. Sales were down to $15.1 million from $17.3 million and they lost $1.353 million or $.16 a share. Cash per share rose to $3.95 from $3.41. Not a great quarter, but not horrible with the cash rise. Our valuation fell to $14.04-still more than double the current price, and with a huge cash cushion.
In April the company announced that it would not do the stock buy back that Skellig was suggesting. We don’t like buy backs anyway. Hopefully Skellig will keep pushing management to get the share price up. Their ownership is up to 5.86%.
Up 10%, BUY

Astex Pharmaceuticals Inc. (Was SuperGen Inc.) (NASDAQ-ASTX)-Recommended 10/4/2010)
Buy Price-$2.31 (was $2.09 before adding $10,000)
Valuation $3.11 (was $5.21, $4.89, $4.37, $3.48)
Closed up $.03 at $1.92
Earnings out in July. Despite that the quarter results did not include the results of Astex, they provided good guidance of what the second half’s combined results will be. For the latest quarter, revenue rose to $11.7 million from $9.9 million last year and they made $.01 a share versus $.02 last year. This quarter’s results included $1.3 million of expenses related to the merger. So all in all, it was a good quarter. However, our valuation based on this quarter fell to $3.11 as revenues declined from the prior quarters $17 million.
As we suspected, the merger with the revenue poor Astex will hurt our valuation which does not take into account the massive drug pipeline of Astex. It is not easy to find a small drug company that has a pile of cash, is not losing a ton of money and is trading at even close to our valuation.
There are $2 BILLION of potential milestone payments down the road.
Down 17%, HOLD

Performance Technology (PTIX-Recommended 3/30/2010)
Buy Price-$2.70
Valuation $4.87-(was $4.99, $3.79, $3.87, $5.03, $5.98, $7.13)
Closed up $.19 at $1.94
Earnings out in August. Sales up 15% to $8.5 million and they made $300,000 on a non-GAAP basis. Not bad at all. Cash is $1.23 a share and our valuation fell a tad to $4.87
We think we will hold on to this one a bit longer and see if they can get to a consistent profit.
Down 28%, HOLD

Extreme Networks (EXTR-Recommended 3/22/2010)
Buy Price-$3.18 (Was $3.04 before adding another $10,000)
Valuation-$6.45 (was $5.67, $7.36, $7.23, $7.31, $6.82, $6.81)
Closed up $.01 at $2.65
Earnings out in August. Sales rose about 5% from last year to $89 million and they lost $2 million or $.02 a share after about $4 million of non-cash charges. Cash stayed at about $147 million or $1.59 per share. Our valuation moved back up to $6.45 a share.
Big news in July. EXTR announced they are laying off 16% of their employees and expect $20 million of cost reductions in FY 2012 and allow the company to make consistent double digit operating income. We view this all as good news for the future. Starboard was cleared to buy up to 15% of EXTR as disclosed in an SEC filing in June.
Starboard Value Fund filed another 13D/A in June disclosing that they had upped their stake again to 9.6%.
Down 17%, BUY

Broadvision (BVSN-Recommended 3/16/2010)
Buy Price-$10.84 (Was $13.50 before double up )
Valuation $18.01-(was $21.21, $22.95, $22.31, $21.77, $23.37, $27.15)
$13.14 per share in cash.
Closed down $.34 at $8.71
Now trading $4.36 below cash value. Nuts.
Marlin Capital Investment bought 248,000 shares on September 16th as reported in their Form 13g in September. Finally somebody has noticed how cheap this is!
Earnings in July. Not so hot. Sales were down to $4 million (from $5.1 million last quarter), and they lost $1.5 million. Cash per share fell to $13.14. Clearly their social networking initiative has not taken hold yet. This is still trading like a Chinese stock, but it is a U.S. company and it trading at less than cash value. Our valuation however fell to $18.01. Without the fact that BVSN is trading at less than cash, we would likely sell BVSN but will hold on another quarter or two and see if they can produce some decent results.
Down 20%, BUY

Gravity Company Ltd. (GRVY-Recommended 1/18/2010)
Buy Price- $1.45 (Was $1.68 before double up)
Valuation $5.33-(Was $5.61, $5.73, $4.38, $4.44, $5.15)
Closed unchanged at $1.28
Now trading at $.82 less than cash value. And they are profitable.
June quarterly earnings out in August. Revenues were just under $14 million and they made $.06 a share. Only fly in the ointment was that Ragnarok 2 is delayed until at least Q1 2012. Cash per share rose to $2.10.
Our valuation fell a bit to $5.33 on some margin compression, but at less than cash value and 24% of our valuation this is one good lottery ticket if they ever release Ragnarok 2.
Down 24%, HOLD

AEterna Zentaris (AEZS-Recommended 6/20/2009)
Buy price $1.42 (was $1.78 before adding another $10,000, $1.82 before double up)
Valuation –Speculation.
Closed down $.13 at $1.52
AEZS announced positive Phase 2 results for AEZS 108 in September.
Earnings announced in August. Revenues were up about $900,000 to $6.5 million and their operating loss was about $8 million (compared to $15 million loss last year). AEZS has been diligently selling shares under their announced programs and have about $53 million in cash (but close to 100 million shares outstanding). This is pretty normal for a developing drug company.
Speculative for sure.
Up 7%, HOLD

Spectranetics (SPNC-Recommended 9/2/2006)
Buy price $5.68 (was $8.90, $9.40 before adding $10,000, and was $10.65 before double up),
Valuation –$10.00
Closed up $.25 at $7.14
Earnings out in July. Sales rose 7% to $32.2 million and they actually managed a $.02 profit. Cash rose to $35.7 million.
SPNC announced recently that they finally hired a new CEO. He comes from DaVita, but we were not all that impressed with his resume. I hope he is planning on making a big killing on his stock options at SPNC and not just continuing to screw up like the other current and previous management.
Paragon filed a 13D/A in May disclosing they had upped their stake to 7%.
Up 26%, HOLD

Mediware (MEDW-Recommended 6/4/2007)
Buy Price $6.33, (was $6.52, $6.67 ($10,000 added), $6.98 after double up)
Valuation $18.34 (was $16.07, $15.04, $14.23, $15.02, $14.35, $12.13, $12.57, $12.29, $11.90, $11.30, $11.48, $11.47 $10.99, $10.28, $13.32, $12.89, $13.40)
Closed up $.36 at $11.44
Earnings out in September. Revenues up 20% and EPS more than doubled to $.25 a share. Cash remained at $3.66 a share and our valuation jumped to $18.34.
Constellation resumed selling in early September.
We give up on the sale of the company anytime soon.
Constellation Software owns 21.8%, but put itself up for sale this year. Should have bought Constellation stock, it has tripled since they got into MEDW!
All we read is that medical records will be a hot area, so MEDW looks like the place to be.
Up 81%, HOLD

Vertro (VTRO (was-MIVA)-Recommended 10/21/2007)
Buy Price $8.15 (Was $11.90 before adding another $20,000, $13.10 before another $10,000 and was $15.00 before double up),
Valuation $10.91 (was $12.42, $14.23, $14.76, $12.40, $12.55, $10.85, $8.25, $9.45, $28.05, $32.10, $34.20, $37.90, $37.95)
Closed down $.08 at $1.76
VTRO announced in September that their new homepage was generating 30% higher revenue per install. They needed some good news here.
Earnings announced in August. Not great. Sales were down $1 million from last year to $7.5 million and they lost $300,000 ($.05 per share).
Should have sold this when it traded over $6. Our valuation fell to $10.91 and cash per share fell to $.67.
Down 79% HOLD

Angeion Corporation (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $13.13 (was $13.19, $13.60, $15.00, $13.06, $12.15, $11.29, $11.73, $11.47, $11.16, $9.53, $13.30, $13.03)
Closed up $.20 at $4.55
CEO bought 10,000 shares in September at $4.25. Good sign.
Earnings in August. Another lackluster quarter. Sales fell from $7.1 million to $6.8 million and they lost $81,000 or $.02 a share. Our valuation fell slightly to $13.13 and cash was $2.39 per share. If this company could just show a bit of growth I think we would see $10 in short order—if.
Blueline Partners still owns 7.6% of ANGN and ought to be pushing on the company to do something about the stock price.
Up 19%, BUY

OB-abies (Bulletin Board Listed Stocks)

As proven by OPTIO, patience is necessary with these stocks.

ARI Networks (ARIS.ob-Recommended 8/19/2006)
Buy price $1.61 (Was $1.78 before another $10,000 added, was $2.06 before double up),
Valuation $5.65 (was $5.39, $4,86, $5.60, $5.73, $5.54, $5.74, $5.96, $4.72, $5.19, $5.66, $5.63, $5.61, $5.71, $5.49, $5.34, $5.03, $5.28, $5.28, $5.21)
Closed at $.98 up $.03
ARIS filed an 8k last week with presentation materials for a “potential investor”. They talk about how they think their shares are undervalued. There may be some life here.
Earnings out in June. Sales were flat at $5.354 million, operating income however jumped to $675,000 from $297,000 and they made $.07 per share (about $.04 excluding non-recurring and discontinued operations). Our valuation jumped back up to $5.65 on higher than expected margins. If they can maintain $.04 per quarter (fully taxed), we should be on our way to having a winner here.
Wake up management–you have a great little company here worth 5X what it is selling for.
Now down 39%, BUY, Still a Huge valuation gap here.

Rand Worldwide (RWWI.ob (Was Avatech, AVSO.ob)-Bought November 28, 2005)
Buy price $.79 (Was $.93, $.99 and $1.19 before adding $10,000-each time),
NEW Valuation $2.12 (was $2.60, $2.40, $1.90, $2.26 $3.07, $3.03, $2.38, $2.57, $2.81, $2.78, $3.30, $3.76, $4.00 $3.41, $3.05, $2.53, $3.25, $3.29 $2.69, $3.36, $3.81)
Stock closed at $.79, up $.09
Earnings out last week. Not bad. Revenues were $23.3 million and they made $.01 per share. For the year they ended up with revenues of $89.2 million, 47% gross margins and they made $1.8 million or $.03 a share, after $1.9 million of one-time merger expenses. Not bad for a company with a market cap of $39 million. Our valuation dropped to $2.12 a share on the seasonal drop in revenues. Still more than 2X the current price.
Down 1%, HOLD

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $1.23 (Was $.91, $1.21, $.71, $.83, $.88 $.96, $.93, $.75, $.85, $1.57, $1.40, $1.29, $1.38, $1.31, $1.38, $1.29, $1.42, $1.28 $1.13, $1.05, $.82)
Ask price $.105, closed at $.09.
CEO bought more shares in September, about 40,000 in total.
One of CTI’s directors bought 254,000 shares in August and the CEO bought 38,000 more. Finally, some trading activity!
Earnings announced in August. Not bad at all. .Revenues increased from $3.578 million to $4 million and they only lost $.01 per share. The good news is that they got a $7 million prepayment on a big U.K. order and were able to pay off all their debt and end up with $4.65 million in net cash. This is $.16 a share—double the current trading price. VOIP revenues more than doubled to $461,000 from $197,000 last year and almost doubled from $246,000 last quarter. VOIP still lost $545,000 but the loss was $100,000 less than last year. Our valuation spiked back up to $1.23.
At a $2.5 million market cap, this is stupidly cheap. Their intellectual property is probably worth 10 times this price. They need to liquefy this value somehow.
They might have to sell or shut this VOIP business down in our opinion. Just losing too much money, and eroding shareholder value–or it could be a home run.
Still an “undercover” company and stock.
Down 61%. HOLD

Lotus Pharmaceuticals (LTUS.ob-Recommended 12/3/2007)
Buy price $1.68 (Was $1.80 before $10,000 adder, $2.16 before double-up)
Valuation-$1.05 (Was $2.43, $4.11, $4.84, $4.98, $4.60, $3.82, $4.00, $3.68, $3.12, $3.98, $4.44, $3.22, $2.12, $4.56, $4.16)
Closed at $.38, unchanged.
Last earnings report in August. Sales were down $200,000 to $18.7 million and they made $.06 a share compared to $.24 last year. Our valuation plunged to $1.05 per share on margin and income declines. Gross margins fell to 26% from 48% last year. We are now worried for the first time that with the decline in net income, that they may be having liquidity issues with all of their capital commitments. If this is going to work, it won’t be until 2012 that we see anything.
Down 78%, HOLD

All of last weeks gains evaporated this week.

Note that Interactive Brokers imposed new margin requirements that went into effect last week and will continue to have impact through next week. They raised their margin requirements to 100% on stocks trading with a market cap under $250 million. This has had some extra impact on small cap stocks on top of the lousy market. They also did this to Chinese stocks (including our LTUS) in April of this year.

Some of our stocks are just stupid cheap—compared to their cash on hand. Check the list in our posting of 9/2/2011.

We are therefor doubling up on GRVY. New average buy price will be $1.45. Also double up on BVSN. New average buy price will be $10.84. Lastly add another $10,000 to MITL. New average buy price will be $3.04.

We were down 4.6% last week and are now down 7.4% for the year.

The DOW was down 6.4% last week, NASDAQ was down 5.3% and the S+P 500 was down 6.5%. The Russell 3000 was down 6.9%.

AVSO, BVSN, CCUR, EXTR, RIMG, MTSL and MITL are our favorites.

For the year, the DOW is down 7%, NASDAQ is down 6.4%, S+P 500 is down 9.6%, the Russell 3000 is down 10.5%

Last week we went 6 stocks up, 14 down and 1 unchanged. Since inception we are now 48 stocks up and 23 down for a 70% winning percentage (80% is our target win %).

Since our beginning, we have closed out the following positions:

2006-NTCT +44%
2006-ONXS +11% (Buyout offer)
2006-DTLK +41%
2006-CAW +21% (Buyout offer)
2007-IYXI.ob +44% (Buyout offer)
2007-MOBI +47% (Buyout offer)
2007-INFT +11% (Buyout offer)
2007-RITT +62%
2007-MIVA +55%
2007-DTLK +25% (2 weeks)
2007-PDLI + 3%
2007-QADI +25%
2007-CIMT +50%
2007-BDR +19%
2007-LINN.ob -57% (mortgage business bust didn’t help here)
2007-TISA -39% (take some tax loss for 2007 due to disappointing results.
2008-ANGN +26%
2008-OPTO.ob +40% (Buy-out offer)
2008-PDLI +9% (company split, and special dividend)
2008-BDAY -39% (long overdue takeover offer-or “take-under”)
2008-DTLK +40% (third trip on this one)
2008-ILOG +26% (Buy-out offer from IBM)
2008-PARL +56%
2009-MBRK +67%
2009-SNWL +14%
2009-CYNO +25%
2009-DTLK +33%
2009-NED +46%
2009-CUTR +13%
2009-HSTM +67% (continued good earnings)
2009-RNWK +36%
2009-OPK +116%
2009-CLZR -32% (a loser even on a buy-out)
2009-DTLK +28% (our 5th profitable trip on this one)
2010-HPOL +110%
2010-DIVX +25%
2010-CHRD +37% Buyout (2 weeks after we recommended it)
2010-HPOL +30%
2010-MGIC +82%
2010-GSL +78%
2010-CCEL +49%
2010-HPOL +27%
2010-CAW EVEN (excluding 2.5 years of dividends)
2011-DWCH +116%
2011-IPAS +15%
2011-PRM +56% Buyout (1 week after we recommended it)
2011-RST +12%
2011-NINE -10%

The model portfolio assumes $10,000 invested in each stock (unless we double-up–then it is $20,000), less $10 commission each way (TD Ameritrade rate).

For the 48 stocks that we closed out since 2006 (43 were winners) the average net gain was 37%.

Sigma Designs Inc. (NASDAQ-SIGM)-Recommended 7/11/2011)
Buy Price-$8.49
Valuation $13.40 (Was $16.02)
Closed down $.55 at $7.99
Earnings out in August. Sales were down 23% to just under $47 million and they lost $22 million. Yuck. But it is not as bad as it seems. Cash and investments actually went up to $5.40 a share ($170 million) and if you exclude the GAAP non-cash BS and the inventory write down, the loss was “only” about $6 million. So we are trading at a market cap of about $65 million (excluding cash) for a $200 million a year chip company with 50% margins. Still pretty stupid we think. However, our valuation dived to $13.40, so we need to keep our eye on this one.
Down 6%, HOLD

Mitel Networks (NASDAQ-MITL)-Recommended 7/6/2011)
Buy Price- $3.36( Was $3.95 before $10,000 added)
Valuation $14.04 (Was $10.39)
Closed down $.60 at $2.55
Earnings in August. Pretty good. Revenues were $164 million up from $160 million last year. Non-GAAP net income was $9.2 million or $.16 a share compared to $10.8 million and $.19 a share last year. They took a 44.8 million restructuring charge in the quarter, to they reported a loss of $2.8 million in the quarter.
Our valuation jumped to $14.04.
Down 24%, BUY

Rimage (NASDAQ-RIMG)-Recommended 5/24/2011)
Buy Price-$14.20
Valuation $25.63 (Was $26.45)
Closed down $.77 at $13.25
Yield here is 3% and cash is 94% of its market cap.
Arcadia is pushing again. They sent a letter to Rimage on September 12th, again asking for the $9 dividend and making vague threats of doing something. Not clear what exactly. Oust the CEO, make a tender offer are among the possibilities we guess.
Earnings out in July. Sales were off about 10% to $20.2 million and earnings were off $.10 to $.12 per share. Cash continued to rise to $119 million ($12.49 per share). Our valuation slipped a bit to $25.63 on the lower sales. With the 2.6% dividend and a huge cash cushion, we still like RIMG.
Their activist shareholder Arcadia Capital Management sent a letter to the Board in July, suggesting that RIMG should pay out a $9 per share special dividend, and not waste it on some stupid acquisition. We would take the dividend—or a buy-out.
Down 7%, HOLD

Lexmark International (NYSE-LXK)-Recommended 5/24/2011)
Buy Price-$28.80
Valuation $79.12 (Was $63.99)
Closed down $3.46 at $28.03
Earnings in July. They were great. They made $1.27 per share earnings on flat sales up from $1.07 in earnings last year. They are projecting $.86-$.96 in earnings for Q3. They seem easily on track to make over $4 per share this year. Our valuation soared to $79.12 per share. PE guys should be drooling over LXK. This would normally be a “buy” with such a huge discount to our valuation, but the vagaries on the stock analysts make us cautious.
Down 3%, HOLD

MER Telemanagement (NASDAQ-MTSL)-Recommended 5/17/2011)
Buy Price-$1.42 (Was $1.50 before adding another $10,000 investment)
Valuation $5.61 (Was $5.11)
Closed down $.19 at $1.23
MER announced a contract extension in August of $2.5 million (minimum). This is almost 50% of MER’s entire market cap.
Earnings in August. Not bad. Sales were just over $3 million and they made over $200,000 or $.05 a share. For the six months they have made $.08 a share (untaxed of course). So MTSL is trading at about 8X untaxed annualized earnings. Oh yeah, they have $.63 a share in cash also (up from $.60 last quarter). Our valuation jumped to $5.61 per share.
Down 13% BUY

Harris Interactive (NASDAQ-HPOL)-Recommended 3/3/2010)
Buy Price-$.92
Valuation $2.63 (Was $2.97)
Closed at $.62, down $.05
New CEO is cleaning up. They are closing their Hong Kong, Singapore and Shanghai offices and downsizing their U.K. office. Their will be a restructuring charge in the September quarter of some amount. Nevertheless this will all help to reduce their losses going forward and get this ready to sell.
Old CEO was booted in June and a turnaround guy made CEO. This is good news. He has sold his previous companies.
Latest earnings were not good. Sales fell 7% and they lost $2.3 million or $.04 per share. Our valuation fell to $2.63 per share, still 4X the current price.
Down 33%, HOLD

Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)
Buy Price-$5.08
Valuation $14.04 (was $18.54, $15.99)
Closed down $.31 at $5.40
Earnings out in August. Sales were down to $15.1 million from $17.3 million and they lost $1.353 million or $.16 a share. Cash per share rose to $3.95 from $3.41. Not a great quarter, but not horrible with the cash rise. Our valuation fell to $14.04-still more than double the current price, and with a huge cash cushion.
In April the company announced that it would not do the stock buy back that Skellig was suggesting. We don’t like buy backs anyway. Hopefully Skellig will keep pushing management to get the share price up. Their ownership is up to 5.86%.
Up 6%, BUY

Astex Pharmaceuticals Inc. (Was SuperGen Inc.) (NASDAQ-ASTX)-Recommended 10/4/2010)
Buy Price-$2.31 (was $2.09 before adding $10,000)
Valuation $3.11 (was $5.21, $4.89, $4.37, $3.48)
Closed down $.32 at $1.89
Earnings out in July. Despite that the quarter results did not include the results of Astex, they provided good guidance of what the second half’s combined results will be. For the latest quarter, revenue rose to $11.7 million from $9.9 million last year and they made $.01 a share versus $.02 last year. This quarter’s results included $1.3 million of expenses related to the merger. So all in all, it was a good quarter. However, our valuation based on this quarter fell to $3.11 as revenues declined from the prior quarters $17 million.
As we suspected, the merger with the revenue poor Astex will hurt our valuation which does not take into account the massive drug pipeline of Astex. It is not easy to find a small drug company that has a pile of cash, is not losing a ton of money and is trading at even close to our valuation.
There are $2 BILLION of potential milestone payments down the road.
Down 18%, HOLD

Performance Technology (PTIX-Recommended 3/30/2010)
Buy Price-$2.70
Valuation $4.87-(was $4.99, $3.79, $3.87, $5.03, $5.98, $7.13)
Closed down $.25 at $1.75
Earnings out in August. Sales up 15% to $8.5 million and they made $300,000 on a non-GAAP basis. Not bad at all. Cash is $1.23 a share and our valuation fell a tad to $4.87
We think we will hold on to this one a bit longer and see if they can get to a consistent profit.
Down 35%, HOLD

Extreme Networks (EXTR-Recommended 3/22/2010)
Buy Price-$3.18 (Was $3.04 before adding another $10,000)
Valuation-$6.45 (was $5.67, $7.36, $7.23, $7.31, $6.82, $6.81)
Closed down $.18 at $2.64
Earnings out in August. Sales rose about 5% from last year to $89 million and they lost $2 million or $.02 a share after about $4 million of non-cash charges. Cash stayed at about $147 million or $1.59 per share. Our valuation moved back up to $6.45 a share.
Big news in July. EXTR announced they are laying off 16% of their employees and expect $20 million of cost reductions in FY 2012 and allow the company to make consistent double digit operating income. We view this all as good news for the future. Starboard was cleared to buy up to 15% of EXTR as disclosed in an SEC filing in June.
Starboard Value Fund filed another 13D/A in June disclosing that they had upped their stake again to 9.6%.
Down 17%, BUY

Broadvision (BVSN-Recommended 3/16/2010)
Buy Price-$13.50
Valuation $18.01-(was $21.21, $22.95, $22.31, $21.77, $23.37, $27.15)
$13.14 per share in cash.
Closed up $.48 at $9.05
Now trading $4.36 below cash value. Nuts.
Marlin Capital Investment bought 248,000 shares on September 16th as reported in their Form 13g this week. Finally somebody has noticed how cheap this is!
Earnings in July. Not so hot. Sales were down to $4 million (from $5.1 million last quarter), and they lost $1.5 million. Cash per share fell to $13.14. Clearly their social networking initiative has not taken hold yet. This is still trading like a Chinese stock, but it is a U.S. company and it trading at less than cash value. Our valuation however fell to $18.01. Without the fact that BVSN is trading at less than cash, we would likely sell BVSN but will hold on another quarter or two and see if they can produce some decent results.
Down 33%, BUY

Gravity Company Ltd. (GRVY-Recommended 1/18/2010)
Buy Price-$1.68
Valuation $5.33-(Was $5.61, $5.73, $4.38, $4.44, $5.15)
Closed down $.12 at $1.28
Now trading at $.82 less than cash value. And they are profitable.
June quarterly earnings out in August. Revenues were just under $14 million and they made $.06 a share. Only fly in the ointment was that Ragnarok 2 is delayed until at least Q1 2012. Cash per share rose to $2.10.
Our valuation fell a bit to $5.33 on some margin compression, but at less than cash value and 30% of our valuation this is one good lottery ticket if they ever release Ragnarok 2.
Down 24%, BUY

AEterna Zentaris (AEZS-Recommended 6/20/2009)
Buy price $1.42 (was $1.78 before adding another $10,000, $1.82 before double up)
Valuation –Speculation.
Closed down $.23 at $1.65
AEZS announced positive Phase 2 results for AEZS 108 in September. Didn’t seem to matter to investors and we actually lost $.05.
Earnings announced in August. Revenues were up about $900,000 to $6.5 million and their operating loss was about $8 million (compared to $15 million loss last year). AEZS has been diligently selling shares under their announced programs and have about $53 million in cash (but close to 100 million shares outstanding). This is pretty normal for a developing drug company.
Speculative for sure.
Up 16%, HOLD

Spectranetics (SPNC-Recommended 9/2/2006)
Buy price $5.68 (was $8.90, $9.40 before adding $10,000, and was $10.65 before double up),
Valuation –$10.00
Closed up $.17 at $6.89
Earnings out in July. Sales rose 7% to $32.2 million and they actually managed a $.02 profit. Cash rose to $35.7 million.
SPNC announced recently that they finally hired a new CEO. He comes from DaVita, but we were not all that impressed with his resume. I hope he is planning on making a big killing on his stock options at SPNC and not just continuing to screw up like the other current and previous management.
Paragon filed a 13D/A in May disclosing they had upped their stake to 7%.
Up 21%, HOLD

Mediware (MEDW-Recommended 6/4/2007)
Buy Price $6.33, (was $6.52, $6.67 ($10,000 added), $6.98 after double up)
Valuation $18.34 (was $16.07, $15.04, $14.23, $15.02, $14.35, $12.13, $12.57, $12.29, $11.90, $11.30, $11.48, $11.47 $10.99, $10.28, $13.32, $12.89, $13.40)
Closed down $.02 at $11.08
Earnings out in September. Revenues up 20% and EPS more than doubled to $.25 a share. Cash remained at $3.66 a share and our valuation jumped to $18.34.
Constellation resumed selling in early September.
We give up on the sale of the company anytime soon.
Constellation Software owns 21.8%, but put itself up for sale this year. Should have bought Constellation stock, it has tripled since they got into MEDW!
All we read is that medical records will be a hot area, so MEDW looks like the place to be.
Up 75%, HOLD

Vertro (VTRO (was-MIVA)-Recommended 10/21/2007)
Buy Price $8.15 (Was $11.90 before adding another $20,000, $13.10 before another $10,000 and was $15.00 before double up),
Valuation $10.91 (was $12.42, $14.23, $14.76, $12.40, $12.55, $10.85, $8.25, $9.45, $28.05, $32.10, $34.20, $37.90, $37.95)
Closed up $.07 at $1.84
VTRO announced in September that their new homepage was generating 30% higher revenue per install. They needed some good news here.
Earnings announced in August. Not great. Sales were down $1 million from last year to $7.5 million and they lost $300,000 ($.05 per share).
Should have sold this when it traded over $6. Our valuation fell to $10.91 and cash per share fell to $.67.
Down 78% HOLD

Angeion Corporation (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $13.13 (was $13.19, $13.60, $15.00, $13.06, $12.15, $11.29, $11.73, $11.47, $11.16, $9.53, $13.30, $13.03)
Closed up $.02 at $4.35
CEO bought 10,000 shares in September at $4.25. Good sign.
Earnings in August. Another lackluster quarter. Sales fell from $7.1 million to $6.8 million and they lost $81,000 or $.02 a share. Our valuation fell slightly to $13.13 and cash was $2.39 per share. If this company could just show a bit of growth I think we would see $10 in short order—if.
Blueline Partners still owns 7.6% of ANGN and ought to be pushing on the company to do something about the stock price.
Up 14%, BUY

OB-abies (Bulletin Board Listed Stocks)

As proven by OPTIO, patience is necessary with these stocks.

ARI Networks (ARIS.ob-Recommended 8/19/2006)
Buy price $1.61 (Was $1.78 before another $10,000 added, was $2.06 before double up),
Valuation $5.65 (was $5.39, $4,86, $5.60, $5.73, $5.54, $5.74, $5.96, $4.72, $5.19, $5.66, $5.63, $5.61, $5.71, $5.49, $5.34, $5.03, $5.28, $5.28, $5.21)
Closed at $.95 up $.15.
Earnings out in June. Sales were flat at $5.354 million, operating income however jumped to $675,000 from $297,000 and they made $.07 per share (about $.04 excluding non-recurring and discontinued operations). Our valuation jumped back up to $5.65 on higher than expected margins. If they can maintain $.04 per quarter (fully taxed), we should be on our way to having a winner here.
Wake up management–you have a great little company here worth 6X what it is selling for.
Now down 41%, BUY, Still a Huge valuation gap here.

Rand Worldwide (RWWI.ob (Was Avatech, AVSO.ob)-Bought November 28, 2005)
Buy price $.79 (Was $.93, $.99 and $1.19 before adding $10,000-each time),
Valuation $2.60 (was $2.40, $1.90, $2.26 $3.07, $3.03, $2.38, $2.57, $2.81, $2.78, $3.30, $3.76, $4.00 $3.41, $3.05, $2.53, $3.25, $3.29 $2.69, $3.36, $3.81)
Stock closed at $.70, down $.05
Next earnings due out Wednesday, September 28th, before the market opens.
Last earnings out in May. Sales were $27.4 million and they made $.04 a share. Our valuation jumped to $2.60 a share. Hopefully another quarter or two of positive results will get this over $1.50.
Down 5%, HOLD

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $1.23 (Was $.91, $1.21, $.71, $.83, $.88 $.96, $.93, $.75, $.85, $1.57, $1.40, $1.29, $1.38, $1.31, $1.38, $1.29, $1.42, $1.28 $1.13, $1.05, $.82)
Ask price $.105, closed at $.105.
CEO bought more shares two weeks ago, about 40,000 in total.
One of CTI’s directors bought 254,000 shares in August and the CEO bought 38,000 more. Finally, some trading activity!
Earnings announced in August. Not bad at all. .Revenues increased from $3.578 million to $4 million and they only lost $.01 per share. The good news is that they got a $7 million prepayment on a big U.K. order and were able to pay off all their debt and end up with $4.65 million in net cash. This is $.16 a share—double the current trading price. VOIP revenues more than doubled to $461,000 from $197,000 last year and almost doubled from $246,000 last quarter. VOIP still lost $545,000 but the loss was $100,000 less than last year. Our valuation spiked back up to $1.23.
At a $2.5 million market cap, this is stupidly cheap. Their intellectual property is probably worth 10 times this price. They need to liquefy this value somehow.
They might have to sell or shut this VOIP business down in our opinion. Just losing too much money, and eroding shareholder value–or it could be a home run.
Still an “undercover” company and stock.
Down 61%. HOLD

Lotus Pharmaceuticals (LTUS.ob-Recommended 12/3/2007)
Buy price $1.68 (Was $1.80 before $10,000 adder, $2.16 before double-up)
Valuation-$1.05 (Was $2.43, $4.11, $4.84, $4.98, $4.60, $3.82, $4.00, $3.68, $3.12, $3.98, $4.44, $3.22, $2.12, $4.56, $4.16)
Closed at $.38, up $.01.
Last earnings report in August. Sales were down $200,000 to $18.7 million and they made $.06 a share compared to $.24 last year. Our valuation plunged to $1.05 per share on margin and income declines. Gross margins fell to 26% from 48% last year. We are now worried for the first time that with the decline in net income, that they may be having liquidity issues with all of their capital commitments. If this is going to work, it won’t be until 2012 that we see anything.
Down 78%, HOLD

Good week in the market but only an OK week for us.

Some of our stocks are just stupid cheap—compared to their cash on hand. Check the list in our posting of 9/2/2011.

We were up 3% last week and are now down 2.8% for the year.

The DOW was up 4.7% last week, NASDAQ was up 6.2% and the S+P 500 was up 5.4%. The Russell 3000 was up 5.4%.

AVSO, BVSN, CCUR, EXTR, RIMG, MTSL and MITL are our favorites.

For the year, the DOW is down .6%, NASDAQ is down 1.2%, S+P 500 is down 3.3%, the Russell 3000 is down 3.9%

Last week we went 12 stocks up, 6 down and 3 unchanged. Since inception we are now 50 stocks up and 21 down for a 73% winning percentage (80% is our target win %).

Since our beginning, we have closed out the following positions:

2006-NTCT +44%
2006-ONXS +11% (Buyout offer)
2006-DTLK +41%
2006-CAW +21% (Buyout offer)
2007-IYXI.ob +44% (Buyout offer)
2007-MOBI +47% (Buyout offer)
2007-INFT +11% (Buyout offer)
2007-RITT +62%
2007-MIVA +55%
2007-DTLK +25% (2 weeks)
2007-PDLI + 3%
2007-QADI +25%
2007-CIMT +50%
2007-BDR +19%
2007-LINN.ob -57% (mortgage business bust didn’t help here)
2007-TISA -39% (take some tax loss for 2007 due to disappointing results.
2008-ANGN +26%
2008-OPTO.ob +40% (Buy-out offer)
2008-PDLI +9% (company split, and special dividend)
2008-BDAY -39% (long overdue takeover offer-or “take-under”)
2008-DTLK +40% (third trip on this one)
2008-ILOG +26% (Buy-out offer from IBM)
2008-PARL +56%
2009-MBRK +67%
2009-SNWL +14%
2009-CYNO +25%
2009-DTLK +33%
2009-NED +46%
2009-CUTR +13%
2009-HSTM +67% (continued good earnings)
2009-RNWK +36%
2009-OPK +116%
2009-CLZR -32% (a loser even on a buy-out)
2009-DTLK +28% (our 5th profitable trip on this one)
2010-HPOL +110%
2010-DIVX +25%
2010-CHRD +37% Buyout (2 weeks after we recommended it)
2010-HPOL +30%
2010-MGIC +82%
2010-GSL +78%
2010-CCEL +49%
2010-HPOL +27%
2010-CAW EVEN (excluding 2.5 years of dividends)
2011-DWCH +116%
2011-IPAS +15%
2011-PRM +56% Buyout (1 week after we recommended it)
2011-RST +12%
2011-NINE -10%

The model portfolio assumes $10,000 invested in each stock (unless we double-up–then it is $20,000), less $10 commission each way (TD Ameritrade rate).

For the 48 stocks that we closed out since 2006 (43 were winners) the average net gain was 37%.

Sigma Designs Inc. (NASDAQ-SIGM)-Recommended 7/11/2011)
Buy Price-$8.49
Valuation $13.40 (Was $16.02)
Closed up $.58 at $8.54
Earnings out in August. Sales were down 23% to just under $47 million and they lost $22 million. Yuck. But it is not as bad as it seems. Cash and investments actually went up to $5.40 a share ($170 million) and if you exclude the GAAP non-cash BS and the inventory write down, the loss was “only” about $6 million. So we are trading at a market cap of about $65 million (excluding cash) for a $200 million a year chip company with 50% margins. Still pretty stupid we think. However, our valuation dived to $13.40, so we need to keep our eye on this one.
Up 1%, HOLD

Mitel Networks (NASDAQ-MITL)-Recommended 7/6/2011)
Buy Price- $3.36( Was $3.95 before $10,000 added)
Valuation $14.04 (Was $10.39)
Closed up $.08 at $3.15
Earnings in August. Pretty good. Revenues were $164 million up from $160 million last year. Non-GAAP net income was $9.2 million or $.16 a share compared to $10.8 million and $.19 a share last year. They took a 44.8 million restructuring charge in the quarter, to they reported a loss of $2.8 million in the quarter.
Our valuation jumped to $14.04.
Down 6%, BUY

Rimage (NASDAQ-RIMG)-Recommended 5/24/2011)
Buy Price-$14.20
Valuation $25.63 (Was $26.45)
Closed up $1.01 at $14.02
Yield here is 2.9% and cash is 88% of its market cap.
Arcadia is pushing again. They sent a letter to Rimage on September 12th, again asking for the $9 dividend and making vague threats of doing something. Not clear what exactly. Oust the CEO, make a tender offer are among the possibilities we guess.
Earnings out in July. Sales were off about 10% to $20.2 million and earnings were off $.10 to $.12 per share. Cash continued to rise to $119 million ($12.49 per share). Our valuation slipped a bit to $25.63 on the lower sales. With the 2.6% dividend and a huge cash cushion, we still like RIMG.
Their activist shareholder Arcadia Capital Management sent a letter to the Board in July, suggesting that RIMG should pay out a $9 per share special dividend, and not waste it on some stupid acquisition. We would take the dividend—or a buy-out.
Down 1%, HOLD

Lexmark International (NYSE-LXK)-Recommended 5/24/2011)
Buy Price-$28.80
Valuation $79.12 (Was $63.99)
Closed up $1.07 at $31.49
Earnings in July. They were great. They made $1.27 per share earnings on flat sales up from $1.07 in earnings last year. They are projecting $.86-$.96 in earnings for Q3. They seem easily on track to make over $4 per share this year. Our valuation soared to $79.12 per share. PE guys should be drooling over LXK. This would normally be a “buy” with such a huge discount to our valuation, but the vagaries on the stock analysts make us cautious.
Up 9%, HOLD

MER Telemanagement (NASDAQ-MTSL)-Recommended 5/17/2011)
Buy Price-$1.42 (Was $1.50 before adding another $10,000 investment)
Valuation $5.61 (Was $5.11)
Closed down $.03 at $1.42
MER announced a contract extension in August of $2.5 million (minimum). This is almost 50% of MER’s entire market cap.
Earnings in August. Not bad. Sales were just over $3 million and they made over $200,000 or $.05 a share. For the six months they have made $.08 a share (untaxed of course). So MTSL is trading at about 8X untaxed annualized earnings. Oh yeah, they have $.63 a share in cash also (up from $.60 last quarter). Our valuation jumped to $5.61 per share.
EVEN BUY

Harris Interactive (NASDAQ-HPOL)-Recommended 3/3/2010)
Buy Price-$.92
Valuation $2.63 (Was $2.97)
Closed at $.62, up $.05
New CEO is cleaning up. They are closing their Hong Kong, Singapore and Shanghai offices and downsizing their U.K. office. Their will be a restructuring charge in the September quarter of some amount. Nevertheless this will all help to reduce their losses going forward and get this ready to sell.
Old CEO was booted in June and a turnaround guy made CEO. This is good news. He has sold his previous companies.
Latest earnings were not good. Sales fell 7% and they lost $2.3 million or $.04 per share. Our valuation fell to $2.63 per share, still 4X the current price.
Down 27%, HOLD

Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)
Buy Price-$5.08
Valuation $14.04 (was $18.54, $15.99)
Closed up $.17 at $5.71
Earnings out in August. Sales were down to $15.1 million from $17.3 million and they lost $1.353 million or $.16 a share. Cash per share rose to $3.95 from $3.41. Not a great quarter, but not horrible with the cash rise. Our valuation fell to $14.04-still more than double the current price, and with a huge cash cushion.
In April the company announced that it would not do the stock buy back that Skellig was suggesting. We don’t like buy backs anyway. Hopefully Skellig will keep pushing management to get the share price up. Their ownership is up to 5.86%.
Up 12%, BUY

Astex Pharmaceuticals Inc. (Was SuperGen Inc.) (NASDAQ-ASTX)-Recommended 10/4/2010)
Buy Price-$2.31 (was $2.09 before adding $10,000)
Valuation $3.11 (was $5.21, $4.89, $4.37, $3.48)
Closed up $.18 at $2.21
Company name and trading symbol changed last week.
Earnings out in July. Despite that the quarter results did not include the results of Astex, they provided good guidance of what the second half’s combined results will be. For the latest quarter, revenue rose to $11.7 million from $9.9 million last year and they made $.01 a share versus $.02 last year. This quarter’s results included $1.3 million of expenses related to the merger. So all in all, it was a good quarter. However, our valuation based on this quarter fell to $3.11 as revenues declined from the prior quarters $17 million.
As we suspected, the merger with the revenue poor Astex will hurt our valuation which does not take into account the massive drug pipeline of Astex. It is not easy to find a small drug company that has a pile of cash, is not losing a ton of money and is trading at even close to our valuation.
There are $2 BILLION of potential milestone payments down the road.
Down 4%, HOLD

Performance Technology (PTIX-Recommended 3/30/2010)
Buy Price-$2.70
Valuation $4.87-(was $4.99, $3.79, $3.87, $5.03, $5.98, $7.13)
Closed down $.05 at $2.00
Earnings out in August. Sales up 15% to $8.5 million and they made $300,000 on a non-GAAP basis. Not bad at all. Cash is $1.23 a share and our valuation fell a tad to $4.87
We think we will hold on to this one a bit longer and see if they can get to a consistent profit.
Down 26%, HOLD

Extreme Networks (EXTR-Recommended 3/22/2010)
Buy Price-$3.18 (Was $3.04 before adding another $10,000)
Valuation-$6.45 (was $5.67, $7.36, $7.23, $7.31, $6.82, $6.81)
Closed up $.15 at $2.82
Earnings out in August. Sales rose about 5% from last year to $89 million and they lost $2 million or $.02 a share after about $4 million of non-cash charges. Cash stayed at about $147 million or $1.59 per share. Our valuation moved back up to $6.45 a share.
Big news in July. EXTR announced they are laying off 16% of their employees and expect $20 million of cost reductions in FY 2012 and allow the company to make consistent double digit operating income. We view this all as good news for the future. Starboard was cleared to buy up to 15% of EXTR as disclosed in an SEC filing in June.
Starboard Value Fund filed another 13D/A in June disclosing that they had upped their stake again to 9.6%.
Down 11%, BUY

Broadvision (BVSN-Recommended 3/16/2010)
Buy Price-$13.50
Valuation $18.01-(was $21.21, $22.95, $22.31, $21.77, $23.37, $27.15)
$13.14 per share in cash.
Closed down $.03 at $8.57
Now trading $4.57 below cash value. Nuts.
Earnings in July. Not so hot. Sales were down to $4 million (from $5.1 million last quarter), and they lost $1.5 million. Cash per share fell to $13.14. Clearly their social networking initiative has not taken hold yet. This is still trading like a Chinese stock, but it is a U.S. company and it trading at less than cash value. Our valuation however fell to $18.01. Without the fact that BVSN is trading at less than cash, we would likely sell BVSN but will hold on another quarter or two and see if they can produce some decent results.
Down 36%, BUY

Gravity Company Ltd. (GRVY-Recommended 1/18/2010)
Buy Price-$1.68
Valuation $5.33-(Was $5.61, $5.73, $4.38, $4.44, $5.15)
Closed unchanged at $1.40
Now trading at $.70 less than cash value. And they are profitable.
June quarterly earnings out in August. Revenues were just under $14 million and they made $.06 a share. Only fly in the ointment was that Ragnarok 2 is delayed until at least Q1 2012. Cash per share rose to $2.10.
Our valuation fell a bit to $5.33 on some margin compression, but at less than cash value and 30% of our valuation this is one good lottery ticket if they ever release Ragnarok 2.
Down 17%, HOLD

AEterna Zentaris (AEZS-Recommended 6/20/2009)
Buy price $1.42 (was $1.78 before adding another $10,000, $1.82 before double up)
Valuation –Speculation.
Closed unchanged at $1.88
AEZS announced positive Phase 2 results for AEZS 108 last week. Didn’t seem to matter to investors and we actually lost $.05.
Earnings announced in August. Revenues were up about $900,000 to $6.5 million and their operating loss was about $8 million (compared to $15 million loss last year). AEZS has been diligently selling shares under their announced programs and have about $53 million in cash (but close to 100 million shares outstanding). This is pretty normal for a developing drug company.
Speculative for sure.
Up 32%, HOLD

Spectranetics (SPNC-Recommended 9/2/2006)
Buy price $5.68 (was $8.90, $9.40 before adding $10,000, and was $10.65 before double up),
Valuation –$10.00
Closed up $.62 at $6.72
SPNC filed an 8k late on Friday. They lost another lawsuit. This one will only cost about $800,000. They may appeal and burn more legal fees. I hope the new CEO straightens these jokers out.
Earnings out in July. Sales rose 7% to $32.2 million and they actually managed a $.02 profit. Cash rose to $35.7 million.
SPNC announced recently that they finally hired a new CEO. He comes from DaVita, but we were not all that impressed with his resume. I hope he is planning on making a big killing on his stock options at SPNC and not just continuing to screw up like the other current and previous management.
Paragon filed a 13D/A in May disclosing they had upped their stake to 7%.
Up 18%, HOLD

Mediware (MEDW-Recommended 6/4/2007)
Buy Price $6.33, (was $6.52, $6.67 ($10,000 added), $6.98 after double up)
Valuation $18.34 (was $16.07, $15.04, $14.23, $15.02, $14.35, $12.13, $12.57, $12.29, $11.90, $11.30, $11.48, $11.47 $10.99, $10.28, $13.32, $12.89, $13.40)
Closed down $.12 at $11.10
Earnings out in September. Revenues up 20% and EPS more than doubled to $.25 a share. Cash remained at $3.66 a share and our valuation jumped to $18.34.
Constellation resumed selling in early September.
We give up on the sale of the company anytime soon.
Constellation Software owns 21.8%, but put itself up for sale this year. Should have bought Constellation stock, it has tripled since they got into MEDW!
All we read is that medical records will be a hot area, so MEDW looks like the place to be.
Up 75%, HOLD

Vertro (VTRO (was-MIVA)-Recommended 10/21/2007)
Buy Price $8.15 (Was $11.90 before adding another $20,000, $13.10 before another $10,000 and was $15.00 before double up),
Valuation $10.91 (was $12.42, $14.23, $14.76, $12.40, $12.55, $10.85, $8.25, $9.45, $28.05, $32.10, $34.20, $37.90, $37.95)
Closed up $.35 at $1.75
VTRO announced last week that their new homepage was generating 30% higher revenue per install. They needed some good news here.
Earnings announced in August. Not great. Sales were down $1 million from last year to $7.5 million and they lost $300,000 ($.05 per share).
Should have sold this when it traded over $6. Our valuation fell to $10.91 and cash per share fell to $.67.
Down 79% HOLD

Angeion Corporation (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $13.13 (was $13.19, $13.60, $15.00, $13.06, $12.15, $11.29, $11.73, $11.47, $11.16, $9.53, $13.30, $13.03)
Closed up $.44 at $4.33
CEO bought 10,000 shares last week at $4.25. Good sign.
Earnings in August. Another lackluster quarter. Sales fell from $7.1 million to $6.8 million and they lost $81,000 or $.02 a share. Our valuation fell slightly to $13.13 and cash was $2.39 per share. If this company could just show a bit of growth I think we would see $10 in short order—if.
Blueline Partners still owns 7.6% of ANGN and ought to be pushing on the company to do something about the stock price.
Up 13%, BUY

OB-abies (Bulletin Board Listed Stocks)

As proven by OPTIO, patience is necessary with these stocks.

ARI Networks (ARIS.ob-Recommended 8/19/2006)
Buy price $1.61 (Was $1.78 before another $10,000 added, was $2.06 before double up),
Valuation $5.65 (was $5.39, $4,86, $5.60, $5.73, $5.54, $5.74, $5.96, $4.72, $5.19, $5.66, $5.63, $5.61, $5.71, $5.49, $5.34, $5.03, $5.28, $5.28, $5.21)
Closed at $.80 up $.05.
Earnings out in June. Sales were flat at $5.354 million, operating income however jumped to $675,000 from $297,000 and they made $.07 per share (about $.04 excluding non-recurring and discontinued operations). Our valuation jumped back up to $5.65 on higher than expected margins. If they can maintain $.04 per quarter (fully taxed), we should be on our way to having a winner here.
Wake up management–you have a great little company here worth 6X what it is selling for.
Now down 50%, BUY, Still a Huge valuation gap here.

Rand Worldwide (RWWI.ob (Was Avatech, AVSO.ob)-Bought November 28, 2005)
Buy price $.79 (Was $.93, $.99 and $1.19 before adding $10,000-each time),
Valuation $2.60 (was $2.40, $1.90, $2.26 $3.07, $3.03, $2.38, $2.57, $2.81, $2.78, $3.30, $3.76, $4.00 $3.41, $3.05, $2.53, $3.25, $3.29 $2.69, $3.36, $3.81)
Stock closed at $.75, up $.03
Earnings out in May. Sales were $27.4 million and they made $.04 a share. Our valuation jumped to $2.60 a share. Hopefully another quarter or two of positive results will get this over $1.50.
Down 5%, HOLD

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $1.23 (Was $.91, $1.21, $.71, $.83, $.88 $.96, $.93, $.75, $.85, $1.57, $1.40, $1.29, $1.38, $1.31, $1.38, $1.29, $1.42, $1.28 $1.13, $1.05, $.82)
Ask price $.10, closed at $.08.
CEO bought more shares last week, about 40,000 in total.
One of CTI’s directors bought 254,000 shares in August and the CEO bought 38,000 more. Finally, some trading activity!
Earnings announced in August. Not bad at all. .Revenues increased from $3.578 million to $4 million and they only lost $.01 per share. The good news is that they got a $7 million prepayment on a big U.K. order and were able to pay off all their debt and end up with $4.65 million in net cash. This is $.16 a share—double the current trading price. VOIP revenues more than doubled to $461,000 from $197,000 last year and almost doubled from $246,000 last quarter. VOIP still lost $545,000 but the loss was $100,000 less than last year. Our valuation spiked back up to $1.23.
At a $2.5 million market cap, this is stupidly cheap. Their intellectual property is probably worth 10 times this price. They need to liquefy this value somehow.
They might have to sell or shut this VOIP business down in our opinion. Just losing too much money, and eroding shareholder value–or it could be a home run.
Still an “undercover” company and stock.
Down 63%. HOLD

Lotus Pharmaceuticals (LTUS.ob-Recommended 12/3/2007)
Buy price $1.68 (Was $1.80 before $10,000 adder, $2.16 before double-up)
Valuation-$1.05 (Was $2.43, $4.11, $4.84, $4.98, $4.60, $3.82, $4.00, $3.68, $3.12, $3.98, $4.44, $3.22, $2.12, $4.56, $4.16)
Closed at $.37, unchanged.
Last earnings report in August. Sales were down $200,000 to $18.7 million and they made $.06 a share compared to $.24 last year. Our valuation plunged to $1.05 per share on margin and income declines. Gross margins fell to 26% from 48% last year. We are now worried for the first time that with the decline in net income, that they may be having liquidity issues with all of their capital commitments. If this is going to work, it won’t be until 2012 that we see anything.
Down 78%, HOLD

Well the market was looking good until Friday. European debt worries, spending another half a trillion dollars to create jobs in the US, how many we weren’t told, whatever. We had an up week, while all the averages were down, but we are still down for the year.

Some of our stocks are just stupid cheap—compared to their cash on hand. Check the list in our posting of 9/2/2011.

We were up .8% last week and are now down 5.8% for the year.

The DOW was down 2.2% last week, NASDAQ was down .5% and the S+P 500 was down 1.7%. The Russell 3000 and the Wilshire 5000 were both down 1.6% for the week

AVSO, BVSN, CCUR, EXTR, RIMG, MTSL and MITL are our favorites.

For the year, the DOW is down 5.1%, NASDAQ is down 7%, S+P 500 is down 8.2%, the Russell 3000 is down 8.8% and the Wilshire is down around 9%.

Last week we went 10 stocks up, 8 down and 3 unchanged. Since inception we are now 50 stocks up and 21 down for a 73% winning percentage (80% is our target win %).

Since our beginning, we have closed out the following positions:

2006-NTCT +44%
2006-ONXS +11% (Buyout offer)
2006-DTLK +41%
2006-CAW +21% (Buyout offer)
2007-IYXI.ob +44% (Buyout offer)
2007-MOBI +47% (Buyout offer)
2007-INFT +11% (Buyout offer)
2007-RITT +62%
2007-MIVA +55%
2007-DTLK +25% (2 weeks)
2007-PDLI + 3%
2007-QADI +25%
2007-CIMT +50%
2007-BDR +19%
2007-LINN.ob -57% (mortgage business bust didn’t help here)
2007-TISA -39% (take some tax loss for 2007 due to disappointing results.
2008-ANGN +26%
2008-OPTO.ob +40% (Buy-out offer)
2008-PDLI +9% (company split, and special dividend)
2008-BDAY -39% (long overdue takeover offer-or “take-under”)
2008-DTLK +40% (third trip on this one)
2008-ILOG +26% (Buy-out offer from IBM)
2008-PARL +56%
2009-MBRK +67%
2009-SNWL +14%
2009-CYNO +25%
2009-DTLK +33%
2009-NED +46%
2009-CUTR +13%
2009-HSTM +67% (continued good earnings)
2009-RNWK +36%
2009-OPK +116%
2009-CLZR -32% (a loser even on a buy-out)
2009-DTLK +28% (our 5th profitable trip on this one)
2010-HPOL +110%
2010-DIVX +25%
2010-CHRD +37% Buyout (2 weeks after we recommended it)
2010-HPOL +30%
2010-MGIC +82%
2010-GSL +78%
2010-CCEL +49%
2010-HPOL +27%
2010-CAW EVEN (excluding 2.5 years of dividends)
2011-DWCH +116%
2011-IPAS +15%
2011-PRM +56% Buyout (1 week after we recommended it)
2011-RST +12%
2011-NINE -10%

The model portfolio assumes $10,000 invested in each stock (unless we double-up–then it is $20,000), less $10 commission each way (TD Ameritrade rate).

For the 48 stocks that we closed out since 2006 (43 were winners) the average net gain was 37%.

Sigma Designs Inc. (NASDAQ-SIGM)-Recommended 7/11/2011)
Buy Price-$8.49
Valuation $13.40 (Was $16.02)
Closed up $.54 at $7.96
Earnings out in August. Sales were down 23% to just under $47 million and they lost $22 million. Yuck. But it is not as bad as it seems. Cash and investments actually went up to $5.40 a share ($170 million) and if you exclude the GAAP non-cash BS and the inventory write down, the loss was “only” about $6 million. So we are trading at a market cap of about $65 million (excluding cash) for a $200 million a year chip company with 50% margins. Still pretty stupid we think. However, our valuation dived to $13.40, so we need to keep our eye on this one.
Down 6%, HOLD

Mitel Networks (NASDAQ-MITL)-Recommended 7/6/2011)
Buy Price- $3.36( Was $3.95 before $10,000 added)
Valuation $14.04 (Was $10.39)
Closed down $.45 at $3.07
No good reason for the decline that we see other than a lousy market and no buyers.
Earnings in August. Pretty good. Revenues were $164 million up from $160 million last year. Non-GAAP net income was $9.2 million or $.16 a share compared to $10.8 million and $.19 a share last year. They took a 44.8 million restructuring charge in the quarter, so they reported a loss of $2.8 million in the quarter.
Our valuation jumped to $14.04.
Down 9%, BUY

Rimage (NASDAQ-RIMG)-Recommended 5/24/2011)
Buy Price-$14.20
Valuation $25.63 (Was $26.45)
Closed up $.08 at $13.01
Yield here is 3.1% and cash is 97% of its market cap.
Earnings out in July. Sales were off about 10% to $20.2 million and earnings were off $.10 to $.12 per share. Cash continued to rise to $119 million ($12.49 per share). Our valuation slipped a bit to $25.63 on the lower sales. With the dividend and a huge cash cushion, we still like RIMG.
Their activist shareholder Arcadia Capital Management sent a letter to the Board in July, suggesting that RIMG should pay out a $9 per share special dividend, and not waste it on some stupid acquisition. We would take the dividend—or a buy-out.
Down 8%, HOLD

Lexmark International (NYSE-LXK)-Recommended 5/24/2011)
Buy Price-$28.80
Valuation $79.12 (Was $63.99)
Closed down $.13 at $30.42
Earnings in July. They were great. They made $1.27 per share earnings on flat sales up from $1.07 in earnings last year. They are projecting $.86-$.96 in earnings for Q3. They seem easily on track to make over $4 per share this year. Our valuation soared to $79.12 per share. PE guys should be drooling over LXK. This would normally be a “buy” with such a huge discount to our valuation, but the vagaries on the stock analysts make us cautious.
Up 6%, HOLD

MER Telemanagement (NASDAQ-MTSL)-Recommended 5/17/2011)
Buy Price-$1.42 (Was $1.50 before adding another $10,000 investment)
Valuation $5.61 (Was $5.11)
Closed up $.15 at $1.45
MER announced a contract extension in August of $2.5 million (minimum). This is almost 50% of MER’s entire market cap.
Earnings in August. Not bad. Sales were just over $3 million and they made over $200,000 or $.05 a share. For the six months they have made $.08 a share (untaxed of course). So MTSL is trading at about 8X untaxed annualized earnings. Oh yeah, they have $.63 a share in cash also (up from $.60 last quarter). Our valuation jumped to $5.61 per share.
Up 2%, BUY

Harris Interactive (NASDAQ-HPOL)-Recommended 3/3/2010)
Buy Price-$.92
Valuation $2.63 (Was $2.97)
Closed at $.62, unchanged
New CEO is cleaning up. They are closing their Hong Kong, Singapore and Shanghai offices and downsizing their U.K. office. Their will be a restructuring charge in the September quarter of some amount. Nevertheless this will all help to reduce their losses going forward and get this ready to sell.
Old CEO was booted in June and a turnaround guy made CEO. This is good news. He has sold his previous companies.
Latest earnings were not good. Sales fell 7% and they lost $2.3 million or $.04 per share. Our valuation fell to $2.63 per share, still 4X the current price.
Down 33%, HOLD

Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)
Buy Price-$5.08
Valuation $14.04 (was $18.54, $15.99)
Closed up $.09 at $5.54
Another deal announced last week. This one is a multi-year deal with Rogers Communiations of Canada.
Earnings out in August. Sales were down to $15.1 million from $17.3 million and they lost $1.353 million or $.16 a share. Cash per share rose to $3.95 from $3.41. Not a great quarter, but not horrible with the cash rise. Our valuation fell to $14.04-still more than double the current price, and with a huge cash cushion.
Company announced four new sales wins in China in July. The price shot up to as high as $6.89 on the news.
In April the company announced that it would not do the stock buy back that Skellig was suggesting. We don’t like buy backs anyway. Hopefully Skellig will keep pushing management to get the share price up. Their ownership is up to 5.86%.
Up 9%, BUY

SuperGen Inc. (NASDAQ-SUPG)-Recommended 10/4/2010)
Buy Price-$2.31 (was $2.09 before adding $10,000)
Valuation $3.11 (was $5.21, $4.89, $4.37, $3.48)
Closed down $.01 at $2.03
Earnings out in July. Despite that the quarter results did not include the results of Astex, they provided good guidance of what the second half’s combined results will be. For the latest quarter, revenue rose to $11.7 million from $9.9 million last year and they made $.01 a share versus $.02 last year. This quarter’s results included $1.3 million of expenses related to the merger. So all in all, it was a good quarter. However, our valuation based on this quarter fell to $3.11 as revenues declined from the prior quarters $17 million.
As we suspected, the merger with the revenue poor Astex will hurt our valuation which does not take into account the massive drug pipeline of Astex. It is not easy to find a small drug company that has a pile of cash, is not losing a ton of money and is trading at even close to our valuation.
There are $2 BILLION of potential milestone payments down the road.
Down 12%, HOLD

Performance Technology (PTIX-Recommended 3/30/2010)
Buy Price-$2.70
Valuation $4.87-(was $4.99, $3.79, $3.87, $5.03, $5.98, $7.13)
Closed up $.14 at $2.05
Earnings out in August. Sales up 15% to $8.5 million and they made $300,000 on a non-GAAP basis. Not bad at all. Cash is $1.23 a share and our valuation fell a tad to $4.87
We think we will hold on to this one a bit longer and see if they can get to a consistent profit.
Down 24%, HOLD

Extreme Networks (EXTR-Recommended 3/22/2010)
Buy Price-$3.18 (Was $3.04 before adding another $10,000)
Valuation-$6.45 (was $5.67, $7.36, $7.23, $7.31, $6.82, $6.81)
Closed up $.07 at $2.67
Earnings out in August. Sales rose about 5% from last year to $89 million and they lost $2 million or $.02 a share after about $4 million of non-cash charges. Cash stayed at about $147 million or $1.59 per share. Our valuation moved back up to $6.45 a share.
Big news in July. EXTR announced they are laying off 16% of their employees and expect $20 million of cost reductions in FY 2012 and allow the company to make consistent double digit operating income. We view this all as good news for the future. Starboard was cleared to buy up to 15% of EXTR as disclosed in an SEC filing in June.
Starboard Value Fund filed another 13D/A in June disclosing that they had upped their stake again to 9.6%.
Down 16%, BUY

Broadvision (BVSN-Recommended 3/16/2010)
Buy Price-$13.50
Valuation $18.01-(was $21.21, $22.95, $22.31, $21.77, $23.37, $27.15)
$13.14 per share in cash.
Closed down $.25 at $8.60
Now trading $4.54 below cash value. Nuts.
Earnings in July. Not so hot. Sales were down to $4 million (from $5.1 million last quarter), and they lost $1.5 million. Cash per share fell to $13.14. Clearly their social networking initiative has not taken hold yet. This is still trading like a Chinese stock, but it is a U.S. company and it trading at less than cash value. Our valuation however fell to $18.01. Without the fact that BVSN is trading at less than cash, we would likely sell BVSN but will hold on another quarter or two and see if they can produce some decent results.
Down 36%, BUY

Gravity Company Ltd. (GRVY-Recommended 1/18/2010)
Buy Price-$1.68
Valuation $5.33-(Was $5.61, $5.73, $4.38, $4.44, $5.15)
Closed down $.05 at $1.40
Now trading at $.70 less than cash value. And they are profitable.
June quarterly earnings out in August. Revenues were just under $14 million and they made $.06 a share. Only fly in the ointment was that Ragnarok 2 is delayed until at least Q1 2012. Cash per share rose to $2.10.
Our valuation fell a bit to $5.33 on some margin compression, but at less than cash value and 30% of our valuation this is one good lottery ticket if they ever release Ragnarok 2.
Down 17%, HOLD

AEterna Zentaris (AEZS-Recommended 6/20/2009)
Buy price $1.42 (was $1.78 before adding another $10,000, $1.82 before double up)
Valuation –Speculation.
Closed unchanged at $1.93
AEZS is participating in two investment conferences in September, one on the 7th and the other on the 13th.
Earnings announced in August. Revenues were up about $900,000 to $6.5 million and their operating loss was about $8 million (compared to $15 million loss last year). AEZS has been diligently selling shares under their announced programs and have about $53 million in cash (but close to 100 million shares outstanding). This is pretty normal for a developing drug company.
Speculative for sure.
Up 36%, HOLD

Spectranetics (SPNC-Recommended 9/2/2006)
Buy price $5.68 (was $8.90, $9.40 before adding $10,000, and was $10.65 before double up),
Valuation –$10.00
Closed up $.45 at $6.10
SPNC presented at the Stifel Nicolaus Healthcare conference on September 9th. Late volume of Friday kept SPNC stock even for the day, so maybe it was a good presentation.
Earnings out in July. Sales rose 7% to $32.2 million and they actually managed a $.02 profit. Cash rose to $35.7 million.
SPNC announced recently that they finally hired a new CEO. He comes from DaVita, but we were not all that impressed with his resume. I hope he is planning on making a big killing on his stock options at SPNC and not just continuing to screw up like the other current and previous management.
Paragon filed a 13D/A in May disclosing they had upped their stake to 7%.
Up 7%, HOLD

Mediware (MEDW-Recommended 6/4/2007)
Buy Price $6.33, (was $6.52, $6.67 ($10,000 added), $6.98 after double up)
NEW Valuation $18.34 (was $16.07, $15.04, $14.23, $15.02, $14.35, $12.13, $12.57, $12.29, $11.90, $11.30, $11.48, $11.47 $10.99, $10.28, $13.32, $12.89, $13.40)
Closed up $.05 at $11.22
Blow out earnings last week. Revenues up 20% and EPS more than doubled to $.25 a share. Cash remained at $3.66 a share and our valuation jumped to $18.34. The stock jumped to $12.80 and then slumped to end up just a nickel. Frustrating for sure. Constellation resumed selling again last week. This will keep a cap on the stock price.
We give up on the sale of the company anytime soon.
Constellation Software owns 21.8%, but put itself up for sale this year. Should have bought Constellation stock, it has tripled since they got into MEDW!
All we read is that medical records will be a hot area, so MEDW looks like the place to be.
Up 77%, HOLD

Vertro (VTRO (was-MIVA)-Recommended 10/21/2007)
Buy Price $8.15 (Was $11.90 before adding another $20,000, $13.10 before another $10,000 and was $15.00 before double up),
Valuation $10.91 (was $12.42, $14.23, $14.76, $12.40, $12.55, $10.85, $8.25, $9.45, $28.05, $32.10, $34.20, $37.90, $37.95)
Closed down $.07 at $1.40
Earnings announced in August. Not great. Sales were down $1 million from last year to $7.5 million and they lost $300,000 ($.05 per share).
Should have sold this when it traded over $6. Our valuation fell to $10.91 and cash per share fell to $.67.
Down 83% HOLD

Angeion Corporation (ANGN-Recommended 8/28/2008)
Buy Price-$3.82 (was $5.15 before $10,000 added)
Valuation $13.13 (was $13.19, $13.60, $15.00, $13.06, $12.15, $11.29, $11.73, $11.47, $11.16, $9.53, $13.30, $13.03)
Closed up $.04 at $3.89
Earnings in August. Another lackluster quarter. Sales fell from $7.1 million to $6.8 million and they lost $81,000 or $.02 a share. Our valuation fell slightly to $13.13 and cash was $2.39 per share. If this company could just show a bit of growth I think we would see $10 in short order—if.
Blueline Partners still owns 7.6% of ANGN and ought to be pushing on the company to do something about the stock price.
Up 2%, BUY

OB-abies (Bulletin Board Listed Stocks)

As proven by OPTIO, patience is necessary with these stocks.

ARI Networks (ARIS.ob-Recommended 8/19/2006)
Buy price $1.61 (Was $1.78 before another $10,000 added, was $2.06 before double up),
Valuation $5.65 (was $5.39, $4,86, $5.60, $5.73, $5.54, $5.74, $5.96, $4.72, $5.19, $5.66, $5.63, $5.61, $5.71, $5.49, $5.34, $5.03, $5.28, $5.28, $5.21)
Closed at $.75 unchanged.
Earnings out in June. Sales were flat at $5.354 million, operating income however jumped to $675,000 from $297,000 and they made $.07 per share (about $.04 excluding non-recurring and discontinued operations). Our valuation jumped back up to $5.65 on higher than expected margins. If they can maintain $.04 per quarter (fully taxed), we should be on our way to having a winner here.
Wake up management–you have a great little company here worth 6X what it is selling for.
Now down 53%, BUY, Still a Huge valuation gap here.

Rand Worldwide (RWWI.ob (Was Avatech, AVSO.ob)-Bought November 28, 2005)
Buy price $.79 (Was $.93, $.99 and $1.19 before adding $10,000-each time),
Valuation $2.60 (was $2.40, $1.90, $2.26 $3.07, $3.03, $2.38, $2.57, $2.81, $2.78, $3.30, $3.76, $4.00 $3.41, $3.05, $2.53, $3.25, $3.29 $2.69, $3.36, $3.81)
Stock closed at $.72, up $.04
Earnings out in May. Sales were $27.4 million and they made $.04 a share. Our valuation jumped to $2.60 a share. Hopefully another quarter or two of positive results will get this over $1.50.
Down 9%, HOLD

CTI Holdings (CTIG.ob-Recommended 2/25/2006)
Buy price $.27 ask,
Valuation $1.23 (Was $.91, $1.21, $.71, $.83, $.88 $.96, $.93, $.75, $.85, $1.57, $1.40, $1.29, $1.38, $1.31, $1.38, $1.29, $1.42, $1.28 $1.13, $1.05, $.82)
Ask price $.11, closed at $.11.
One of CTI’s directors bought 254,000 shares in August and the CEO bought 38,000 more.
Earnings announced in August. Not bad at all. .Revenues increased from $3.578 million to $4 million and they only lost $.01 per share. The good news is that they got a $7 million prepayment on a big U.K. order and were able to pay off all their debt and end up with $4.65 million in net cash. This is $.16 a share—well above the current trading price. VOIP revenues more than doubled to $461,000 from $197,000 last year and almost doubled from $246,000 last quarter. VOIP still lost $545,000 but the loss was $100,000 less than last year. Our valuation spiked back up to $1.23.
At a $3.0 million market cap, this is stupidly cheap. Their intellectual property is probably worth 10 times this price. They need to liquefy this value somehow.
They might have to sell or shut this VOIP business down in our opinion. Just losing too much money, and eroding shareholder value–or it could be a home run.
Still an “undercover” company and stock.
Down 59%. HOLD

Lotus Pharmaceuticals (LTUS.ob-Recommended 12/3/2007)
Buy price $1.68 (Was $1.80 before $10,000 adder, $2.16 before double-up)
Valuation-$1.05 (Was $2.43, $4.11, $4.84, $4.98, $4.60, $3.82, $4.00, $3.68, $3.12, $3.98, $4.44, $3.22, $2.12, $4.56, $4.16)
Closed at $.37, down $.07
We continue to wait on this one. China Syndrome and declining earnings and capital committments. They are supposed to move into their Bejing building soon, so maybe this will give the stock a lift, otherwise this will be a tax loss candidate soon.
Last earnings report in August. Sales were down $200,000 to $18.7 million and they made $.06 a share compared to $.24 last year. Our valuation plunged to $1.05 per share on margin and income declines. Gross margins fell to 26% from 48% last year. We are now worried for the first time that with the decline in net income, that they may be having liquidity issues with all of their capital commitments. If this is going to work, it won’t be until 2012 that we see anything.
Down 78%, HOLD

The week started out well then faded to end up mostly down. The markets seem so undervalued, but there is also no confidence—or buyers it seems. Some of our stocks are just stupid cheap—compared to their cash on hand. Check the list below:

Stock Cash as % of market value

BVSN 148%

GRVY 145%

CCUR 72%

RIMG 97%

MSTL 49%

SUPG 68%

PTIX 64%

EXTR 61%

CTIG 146%

ANGN 61%

We were down .1% last week and are now down 6.5% for the year.

The DOW was down .4% last week, NASDAQ was even and the S+P 500 was down 4.2%. The Russell 3000 and the Wilshire 5000 were both down .2% for the week

AVSO, BVSN, CCUR, EXTR, RIMG, MTSL and MITL are our favorites.

For the year, the DOW is down 2.9%, NASDAQ is down 6.5%, S+P 500 is down 6.7%, the Russell 3000 is down 7.1% and the Wilshire is down around 7.4%.

Last week we went 7 stocks up, 12 down and 2 unchanged. Since inception we are now 50 stocks up and 19 down for a 73% winning percentage (80% is our target win %).

Since our beginning, we have closed out the following positions:

2006-NTCT +44%

2006-ONXS +11% (Buyout offer)

2006-DTLK +41%

2006-CAW +21% (Buyout offer)

2007-IYXI.ob +44% (Buyout offer)

2007-MOBI +47% (Buyout offer)

2007-INFT +11% (Buyout offer)

2007-RITT +62%

2007-MIVA +55%

2007-DTLK +25% (2 weeks)

2007-PDLI + 3%

2007-QADI +25%

2007-CIMT +50%

2007-BDR +19%

2007-LINN.ob -57% (mortgage business bust didn’t help here)

2007-TISA -39% (take some tax loss for 2007 due to disappointing results.

2008-ANGN +26%

2008-OPTO.ob +40% (Buy-out offer)

2008-PDLI +9% (company split, and special dividend)

2008-BDAY -39% (long overdue takeover offer-or “take-under”)

2008-DTLK +40% (third trip on this one)

2008-ILOG +26% (Buy-out offer from IBM)

2008-PARL +56%

2009-MBRK +67%

2009-SNWL +14%

2009-CYNO +25%

2009-DTLK +33%

2009-NED +46%

2009-CUTR +13%

2009-HSTM +67% (continued good earnings)

2009-RNWK +36%

2009-OPK +116%

2009-CLZR -32% (a loser even on a buy-out)

2009-DTLK +28% (our 5th profitable trip on this one)

2010-HPOL +110%

2010-DIVX +25%

2010-CHRD +37% Buyout (2 weeks after we recommended it)

2010-HPOL +30%

2010-MGIC +82%

2010-GSL +78%

2010-CCEL +49%

2010-HPOL +27%

2010-CAW EVEN (excluding 2.5 years of dividends)

2011-DWCH +116%

2011-IPAS +15%

2011-PRM +56% Buyout (1 week after we recommended it)

2011-RST +12%

2011-NINE -10%

The model portfolio assumes $10,000 invested in each stock (unless we double-up–then it is $20,000), less $10 commission each way (TD Ameritrade rate).

For the 48 stocks that we closed out since 2006 (43 were winners) the average net gain was 37%.

Sigma Designs Inc. (NASDAQ-SIGM)-Recommended 7/11/2011)

Buy Price-$8.49

Valuation $13.40 (Was $16.02)

Closed down $.29 at $7.42

Earnings out in August. Sales were down 23% to just under $47 million and they lost $22 million. Yuck. But it is not as bad as it seems. Cash and investments actually went up to $5.40 a share ($170 million) and if you exclude the GAAP non-cash BS and the inventory write down, the loss was “only” about $6 million. So we are trading at a market cap of about $65 million (excluding cash) for a $200 million a year chip company with 50% margins. Still pretty stupid we think. However, our valuation dived to $13.40, so we need to keep our eye on this one.

Down 13%, HOLD

Mitel Networks (NASDAQ-MITL)-Recommended 7/6/2011)

Buy Price- $3.36( Was $3.95 before $10,000 added)

NEW Valuation $14.04 (Was $10.39)

Closed up $.52 at $3.52

Earnings last week. Pretty good. Revenues were $164 million up from $160 million last year. Non-GAAP net income was $9.2 million or $.16 a share compared to $10.8 million and $.19 a share last year. They took a 44.8 million restructuring charge in the quarter, so they reported a loss of $2.8 million in the quarter. The stock actually managed a small gain on Friday amid the carnage, after being up as much as fifty cents early in the day.

Our valuation jumped to $14.04.

UP 5%, BUY

Rimage (NASDAQ-RIMG)-Recommended 5/24/2011)

Buy Price-$14.20

Valuation $25.63 (Was $26.45)

Closed down $1.15 at $12.93

Yield here is 2.9% and cash is 97% of its market cap.

Earnings out in July. Sales were off about 10% to $20.2 million and earnings were off $.10 to $.12 per share. Cash continued to rise to $119 million ($12.49 per share). Our valuation slipped a bit to $25.63 on the lower sales. With the 2.6% dividend and a huge cash cushion, we still like RIMG.

Their activist shareholder Arcadia Capital Management sent a letter to the Board in July, suggesting that RIMG should pay out a $9 per share special dividend, and not waste it on some stupid acquisition. We would take the dividend—or a buy-out.

Down 9%, HOLD

Lexmark International (NYSE-LXK)-Recommended 5/24/2011)

Buy Price-$28.80

Valuation $79.12 (Was $63.99)

Closed up $.19 at $30.55

Earnings in July. They were great. They made $1.27 per share earnings on flat sales up from $1.07 in earnings last year. They are projecting $.86-$.96 in earnings for Q3. They seem easily on track to make over $4 per share this year. Our valuation soared to $79.12 per share. PE guys should be drooling over LXK. This would normally be a “buy” with such a huge discount to our valuation, but the vagaries on the stock analysts make us cautious.

Up 6%, HOLD

MER Telemanagement (NASDAQ-MTSL)-Recommended 5/17/2011)

Buy Price-$1.42 (Was $1.50 before adding another $10,000 investment)

Valuation $5.61 (Was $5.11)

Closed down $.14 at $1.30

MER announced a contract extension in August of $2.5 million (minimum). This is almost 50% of MER’s entire market cap.

Earnings in August. Not bad. Sales were just over $3 million and they made over $200,000 or $.05 a share. For the six months they have made $.08 a share (untaxed of course). So MTSL is trading at about 8X untaxed annualized earnings. Oh yeah, they have $.63 a share in cash also (up from $.60 last quarter). Our valuation jumped to $5.61 per share.

Down 9%, BUY

Harris Interactive (NASDAQ-HPOL)-Recommended 3/3/2010)

Buy Price-$.92

Valuation $2.63 (Was $2.97)

Closed at $.62, up $.03

New CEO is cleaning up. They are closing their Hong Kong, Singapore and Shanghai offices and downsizing their U.K. office. Their will be a restructuring charge in the September quarter of some amount. Nevertheless this will all help to reduce their losses going forward and get this ready to sell.

Old CEO was booted in June and a turnaround guy made CEO. This is good news. He has sold his previous companies.

Latest earnings were not good. Sales fell 7% and they lost $2.3 million or $.04 per share. Our valuation fell to $2.63 per share, still 4X the current price.

Down 33%, HOLD

Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)

Buy Price-$5.08

Valuation $14.04 (was $18.54, $15.99)

Closed down $.36 at $5.45

Earnings out in August. Sales were down to $15.1 million from $17.3 million and they lost $1.353 million or $.16 a share. Cash per share rose to $3.95 from $3.41. Not a great quarter, but not horrible with the cash rise. Our valuation fell to $14.04-still more than double the current price, and with a huge cash cushion.

Company announced four new sales wins in China in July. The price shot up to as high as $6.89 on the news.

In April the company announced that it would not do the stock buy back that Skellig was suggesting. We don’t like buy backs anyway. Hopefully Skellig will keep pushing management to get the share price up. Their ownership is up to 5.86%.

Up 7%, BUY

SuperGen Inc. (NASDAQ-SUPG)-Recommended 10/4/2010)

Buy Price-$2.31 (was $2.09 before adding $10,000)

Valuation $3.11 (was $5.21, $4.89, $4.37, $3.48)

Closed down $.06 at $2.04

Earnings out in July. Despite that the quarter results did not include the results of Astex, they provided good guidance of what the second half’s combined results will be. For the latest quarter, revenue rose to $11.7 million from $9.9 million last year and they made $.01 a share versus $.02 last year. This quarter’s results included $1.3 million of expenses related to the merger. So all in all, it was a good quarter. However, our valuation based on this quarter fell to $3.11 as revenues declined from the prior quarters $17 million.

As we suspected, the merger with the revenue poor Astex hurt our valuation which does not take into account the massive drug pipeline of Astex. It is not easy to find a small drug company that has a pile of cash, is not losing a ton of money and is trading at even close to our valuation.

There are $2 BILLION of potential milestone payments down the road.

Down 12%, HOLD

Performance Technology (PTIX-Recommended 3/30/2010)

Buy Price-$2.70

Valuation $4.87-(was $4.99, $3.79, $3.87, $5.03, $5.98, $7.13)

Closed down $.11 at $1.91

Earnings out in August. Sales up 15% to $8.5 million and they made $300,000 on a non-GAAP basis. Not bad at all. Cash is $1.23 a share and our valuation fell a tad to $4.87

We think we will hold on to this one a bit longer and see if they can get to a consistent profit.

Down 29%, HOLD

Extreme Networks (EXTR-Recommended 3/22/2010)

Buy Price-$3.18 (Was $3.04 before adding another $10,000)

Valuation-$6.45 (was $5.67, $7.36, $7.23, $7.31, $6.82, $6.81)

Closed down $.24 at $2.60

Earnings out in August. Sales rose about 5% from last year to $89 million and they lost $2 million or $.02 a share after about $4 million of non-cash charges. Cash stayed at about $147 million or $1.59 per share. Our valuation moved back up to $6.45 a share.

Big news in July. EXTR announced they are laying off 16% of their employees and expect $20 million of cost reductions in FY 2012 and allow the company to make consistent double digit operating income. We view this all as good news for the future. Starboard was cleared to buy up to 15% of EXTR as disclosed in an SEC filing in June.

Starboard Value Fund filed another 13D/A in June disclosing that they had upped their stake again to 9.6%.

Down 18%, BUY

Broadvision (BVSN-Recommended 3/16/2010)

Buy Price-$13.50

Valuation $18.01-(was $21.21, $22.95, $22.31, $21.77, $23.37, $27.15)

$13.14 per share in cash.

Closed down $.34 at $8.85

Now trading $4.29 below cash value. Nuts.

Earnings in July. Not so hot. Sales were down to $4 million (from $5.1 million last quarter), and they lost $1.5 million. Cash per share fell to $13.14. Clearly their social networking initiative has not taken hold yet. This is still trading like a Chinese stock, but it is a U.S. company and it trading at less than cash value. Our valuation however fell to $18.01. Without the fact that BVSN is trading at less than cash, we would likely sell BVSN but will hold on another quarter or two and see if they can produce some decent results.

Down 34%, BUY

Gravity Company Ltd. (GRVY-Recommended 1/18/2010)

Buy Price-$1.68

Valuation $5.33-(Was $5.61, $5.73, $4.38, $4.44, $5.15)

Closed down $.05 at $1.45

Trading at just 70% of cash value.

June quarterly earnings out in August. Revenues were just under $14 million and they made $.06 a share. Only fly in the ointment was that Ragnarok 2 is delayed until at least Q1 2012. Cash per share rose to $2.10.

Our valuation fell a bit to $5.33 on some margin compression, but at less than cash value and 30% of our valuation this is one good lottery ticket if they ever release Ragnarok 2.

Down 14%, HOLD

AEterna Zentaris (AEZS-Recommended 6/20/2009)

Buy price $1.42 (was $1.78 before adding another $10,000, $1.82 before double up)

Valuation –Speculation.

Closed up $.11 at $1.93

AEZS is participating in two investment conferences in September, one on the 7th and the other on the 13th.

Earnings announced in August. Revenues were up about $900,000 to $6.5 million and their operating loss was about $8 million (compared to $15 million loss last year). AEZS has been diligently selling shares under their announced programs and have about $53 million in cash (but close to 100 million shares outstanding). This is pretty normal for a developing drug company.

Speculative for sure.

Up 36%, HOLD

Spectranetics (SPNC-Recommended 9/2/2006)

Buy price $5.68 (was $8.90, $9.40 before adding $10,000, and was $10.65 before double up),

Valuation –$10.00

Closed down $.37 at $5.65

SPNC is presenting at the Stifel Nicolaus Healthcare conference on September 9th.

Earnings out in July. Sales rose 7% to $32.2 million and they actually managed a $.02 profit. Cash rose to $35.7 million.

SPNC announced recently that they finally hired a new CEO. He comes from DaVita, but we were not all that impressed with his resume. I hope he is planning on making a big killing on his stock options at SPNC and not just continuing to screw up like the other current and previous management.

Paragon filed a 13D/A in May disclosing they had upped their stake to 7%.

Down 1%, HOLD

Mediware (MEDW-Recommended 6/4/2007)

Buy Price $6.33, (was $6.52, $6.67 ($10,000 added), $6.98 after double up)

Valuation $16.07 (was $15.04, $14.23, $15.02, $14.35, $12.13, $12.57, $12.29, $11.90, $11.30, $11.48, $11.47 $10.99, $10.28, $13.32, $12.89, $13.40)

Closed up $.84 at $11.17

Earnings due our Wednesday, September 7th before the market opens.

Earnings reported in May. Good again. Sales up 8% and they made $.17 per share up from $.11 last year. Our valuation rose to $16.07 per share. They have $3.66 per share in cash.

MEDW announced what sounded like a nice military contract win in April. No details though, so hard to get too excited. Hopefully this and the acquisition will keep their sales and earnings momentum going.

MEDW announced another acquisition in March. No details of what it cost, or what it will do to earnings.

We give up on the sale of the company anytime soon.

Constellation Software owns 21.8%, but put itself up for sale this year. Should have bought Constellation stock, it has tripled since they got into MEDW!

All we read is that medical records will be a hot area, so MEDW looks like the place to be.

Up 76%, HOLD



Vertro (VTRO (was-MIVA)-Recommended 10/21/2007)

Buy Price $8.15 (Was $11.90 before adding another $20,000, $13.10 before another $10,000 and was $15.00 before double up),

Valuation $10.91 (was $12.42, $14.23, $14.76, $12.40, $12.55, $10.85, $8.25, $9.45, $28.05, $32.10, $34.20, $37.90, $37.95)

Closed unchanged at $1.47

Earnings announced in August. Not great. Sales were down $1 million from last year to $7.5 million and they lost $300,000 ($.05 per share).

Should have sold this when it traded over $6. Our valuation fell to $10.91 and cash per share fell to $.67.

Down 82%, HOLD

Angeion Corporation (ANGN-Recommended 8/28/2008)

Buy Price-$3.82 (was $5.15 before $10,000 added)

NEW Valuation $13.13 (was $13.19, $13.60, $15.00, $13.06, $12.15, $11.29, $11.73, $11.47, $11.16, $9.53, $13.30, $13.03)

Closed down $.18 at $3.85

Earnings out last week. Another lackluster quarter. Sales fell from $7.1 million to $6.8 million and they lost $81,000 or $.02 a share. Our valuation fell slightly to $13.13 and cash was $2.39 per share. If this company could just show a bit of growth I think we would see $10 in short order—if.

Blueline Partners still owns 7.6% of ANGN and ought to be pushing on the company to do something about the stock price.

Up 1%, BUY

OB-abies (Bulletin Board Listed Stocks)

As proven by OPTIO, patience is necessary with these stocks.

ARI Networks (ARIS.ob-Recommended 8/19/2006)

Buy price $1.61 (Was $1.78 before another $10,000 added, was $2.06 before double up),

Valuation $5.65 (was $5.39, $4,86, $5.60, $5.73, $5.54, $5.74, $5.96, $4.72, $5.19, $5.66, $5.63, $5.61, $5.71, $5.49, $5.34, $5.03, $5.28, $5.28, $5.21)

Closed at $.75 up $.09

Earnings out in June. Sales were flat at $5.354 million, operating income however jumped to $675,000 from $297,000 and they made $.07 per share (about $.04 excluding non-recurring and discontinued operations). Our valuation jumped back up to $5.65 on higher than expected margins. If they can maintain $.04 per quarter (fully taxed), we should be on our way to having a winner here.

Wake up management–you have a great little company here worth 6X what it is selling for.

Now down 53%, BUY. Still a Huge valuation gap here.

Rand Worldwide (RWWI.ob (Was Avatech, AVSO.ob)-Bought November 28, 2005)

Buy price $.79 (Was $.93, $.99 and $1.19 before adding $10,000-each time),

Valuation $2.60 (was $2.40, $1.90, $2.26 $3.07, $3.03, $2.38, $2.57, $2.81, $2.78, $3.30, $3.76, $4.00 $3.41, $3.05, $2.53, $3.25, $3.29 $2.69, $3.36, $3.81)

Stock closed at $.68, down $.07

Earnings out in May. Sales were $27.4 million and they made $.04 a share. Our valuation jumped to $2.60 a share. Hopefully another quarter or two of positive results will get this over $1.50.

Down 14%, HOLD

CTI Holdings (CTIG.ob-Recommended 2/25/2006)

Buy price $.27 ask,

Valuation $1.23 (Was $.91, $1.21, $.71, $.83, $.88 $.96, $.93, $.75, $.85, $1.57, $1.40, $1.29, $1.38, $1.31, $1.38, $1.29, $1.42, $1.28 $1.13, $1.05, $.82)

Ask price $.11, closed at $.11.

One of CTI’s directors bought 254,000 shares last week and the CEO bought 38,000 more. Finally, some trading activity!

Earnings announced in August. Not bad at all. .Revenues increased from $3.578 million to $4 million and they only lost $.01 per share. The good news is that they got a $7 million prepayment on a big U.K. order and were able to pay off all their debt and end up with $4.65 million in net cash. This is $.16 a share—double the current trading price. VOIP revenues more than doubled to $461,000 from $197,000 last year and almost doubled from $246,000 last quarter. VOIP still lost $545,000 but the loss was $100,000 less than last year. Our valuation spiked back up to $1.23.

At a $2.5 million market cap, this is stupidly cheap. Their intellectual property is probably worth 10 times this price. They need to liquefy this value somehow.

They might have to sell or shut this VOIP business down in our opinion. Just losing too much money, and eroding shareholder value–or it could be a home run.

Still an “undercover” company and stock.

Down 59%. HOLD

Lotus Pharmaceuticals (LTUS.ob-Recommended 12/3/2007)

Buy price $1.68 (Was $1.80 before $10,000 adder, $2.16 before double-up)

Valuation-$1.05 (Was $2.43, $4.11, $4.84, $4.98, $4.60, $3.82, $4.00, $3.68, $3.12, $3.98, $4.44, $3.22, $2.12, $4.56, $4.16)

Closed at $.44, up $.04

Last earnings report in August. Sales were down $200,000 to $18.7 million and they made $.06 a share compared to $.24 last year. Our valuation plunged to $1.05 per share on margin and income declines. Gross margins fell to 26% from 48% last year. We are now worried for the first time that with the decline in net income, that they may be having liquidity issues with all of their capital commitments. If this is going to work, it won’t be until 2012 that we see anything.

Down 74%, HOLD

Big up week for the markets. Unfortunately we lagged the gains. We seem to hold on to gains a bit longer than the averages, but it also takes us a bit longer to catch back up.

We were up 2.5% last week and are now down 6.4% for the year.

The DOW was up 4.3% last week, NASDAQ was up 5.9% and the S+P 500 was up 4.7%. The Russell 3000 and the Wilshire 5000 were both up 5% for the week

AVSO, CCUR, EXTR, RIMG, MTSL and MITL are our favorites.

For the year, the DOW is down 2.5%, NASDAQ is down 6.5%, S+P 500 is down 6.4%, the Russell 3000 is down 7.1% and the Wilshire is down 7.4%.

Last week we went 9 stocks up, 10 down and 2 unchanged. Since inception we are now 50 stocks up and 19 down for a 73% winning percentage (80% is our target win %).

Since our beginning, we have closed out the following positions:

2006-NTCT +44%

2006-ONXS +11% (Buyout offer)

2006-DTLK +41%

2006-CAW +21% (Buyout offer)

2007-IYXI.ob +44% (Buyout offer)

2007-MOBI +47% (Buyout offer)

2007-INFT +11% (Buyout offer)

2007-RITT +62%

2007-MIVA +55%

2007-DTLK +25% (2 weeks)

2007-PDLI + 3%

2007-QADI +25%

2007-CIMT +50%

2007-BDR +19%

2007-LINN.ob -57% (mortgage business bust didn’t help here)

2007-TISA -39% (take some tax loss for 2007 due to disappointing results.

2008-ANGN +26%

2008-OPTO.ob +40% (Buy-out offer)

2008-PDLI +9% (company split, and special dividend)

2008-BDAY -39% (long overdue takeover offer-or “take-under”)

2008-DTLK +40% (third trip on this one)

2008-ILOG +26% (Buy-out offer from IBM)

2008-PARL +56%

2009-MBRK +67%

2009-SNWL +14%

2009-CYNO +25%

2009-DTLK +33%

2009-NED +46%

2009-CUTR +13%

2009-HSTM +67% (continued good earnings)

2009-RNWK +36%

2009-OPK +116%

2009-CLZR -32% (a loser even on a buy-out)

2009-DTLK +28% (our 5th profitable trip on this one)

2010-HPOL +110%

2010-DIVX +25%

2010-CHRD +37% Buyout (2 weeks after we recommended it)

2010-HPOL +30%

2010-MGIC +82%

2010-GSL +78%

2010-CCEL +49%

2010-HPOL +27%

2010-CAW EVEN (excluding 2.5 years of dividends)

2011-DWCH +116%

2011-IPAS +15%

2011-PRM +56% Buyout (1 week after we recommended it)

2011-RST +12%

2011-NINE -10%

The model portfolio assumes $10,000 invested in each stock (unless we double-up–then it is $20,000), less $10 commission each way (TD Ameritrade rate).

For the 48 stocks that we closed out since 2006 (43 were winners) the average net gain was 37%.

Sigma Designs Inc. (NASDAQ-SIGM)-Recommended 7/11/2011)

Buy Price-$8.49

NEW Valuation $13.40 (Was $16.02)

Closed down $.15 at $7.71

Well this is the first earnings report that has really stunk up the place. Sales were down 23% to just under $47 million and they lost $22 million. Yuck. But it is not as bad as it seems. Cash and investments actually went up to $5.40 a share ($170 million) and if you exclude the GAAP non-cash BS and the inventory write down, the loss was “only” about $6 million. So we are trading at a market cap of about $75 million (excluding cash) for a $200 million a year chip company with 50% margins. Still pretty stupid we think. However, our valuation dived to $13.40, so we need to keep our eye on this one.

Down 9%, HOLD

Mitel Networks (NASDAQ-MITL)-Recommended 7/6/2011)

Buy Price- $3.36( Was $3.95 before $10,000 added)

Valuation $10.39

Closed up $.08 at $3.00

No reason that we can see for the decline other than the overall market.

Down 11%, BUY

Rimage (NASDAQ-RIMG)-Recommended 5/24/2011)

Buy Price-$14.20

Valuation $25.63 (Was $26.45)

Closed up $.87 at $14.08

Earnings out in July. Sales were off about 10% to $20.2 million and earnings were off $.10 to $.12 per share. Cash continued to rise to $119 million ($12.49 per share). Our valuation slipped a bit to $25.63 on the lower sales. With the 2.6% dividend and a huge cash cushion, we still like RIMG.

Their activist shareholder Arcadia Capital Management sent a letter to the Board in July, suggesting that RIMG should pay out a $9 per share special dividend, and not waste it on some stupid acquisition. We would take the dividend—or a buy-out.

Down 1%, HOLD

Lexmark International (NYSE-LXK)-Recommended 5/24/2011)

Buy Price-$28.80

Valuation $79.12 (Was $63.99)

Closed up $1.90 at $30.36

Earnings in July. They were great. They made $1.27 per share earnings on flat sales up from $1.07 in earnings last year. They are projecting $.86-$.96 in earnings for Q3. They seem easily on track to make over $4 per share this year. Our valuation soared to $79.12 per share. PE guys should be drooling over LXK. This would normally be a “buy” with such a huge discount to our valuation, but the vagaries on the stock analysts make us cautious.

Up 5%, HOLD

MER Telemanagement (NASDAQ-MTSL)-Recommended 5/17/2011)

Buy Price-$1.42 (Was $1.50 before adding another $10,000 investment)

Valuation $5.61 (Was $5.11)

Closed up $.08 at $1.44

MER announced a contract extension in August of $2.5 million (minimum). This is almost 50% of MER’s entire market cap.

Earnings in August. Not bad. Sales were just over $3 million and they made over $200,000 or $.05 a share. For the six months they have made $.08 a share (untaxed of course). So MTSL is trading at about 8X untaxed annualized earnings. Oh yeah, they have $.63 a share in cash also (up from $.60 last quarter). Our valuation jumped to $5.61 per share.

Up 1%, BUY

Harris Interactive (NASDAQ-HPOL)-Recommended 3/3/2010)

Buy Price-$.92

Valuation $2.63 (Was $2.97)

Closed at $.59, down $.11

New CEO is cleaning up. They are closing their Hong Kong, Singapore and Shanghai offices and downsizing their U.K. office. Their will be a restructuring charge in the September quarter of some amount. Nevertheless this will all help to reduce their losses going forward and get this ready to sell.

Old CEO was booted in June and a turnaround guy made CEO. This is good news. He has sold his previous companies.

Latest earnings were not good. Sales fell 7% and they lost $2.3 million or $.04 per share. Our valuation fell to $2.63 per share, still 4X the current price.

Down 36%, HOLD

Concurrent Computer (NASDAQ-CCUR)-Recommended 2/4/2011)

Buy Price-$5.08

Valuation $18.54 (was $15.99)

Closed down $.04 at $5.81

Next earnings due out Tuesday, August 30th after the market close.

Company announced four new sales wins in China in July. The price shot up to as high as $6.89 on the news.

Latest earnings report was great. Sales up 26% and they made $.06 per share. They have $3.41 per share in net cash. Our valuation spiked to $18.54 per share.

In April the company announced that it would not do the stock buy back that Skellig was suggesting. We don’t like buy backs anyway. Hopefully Skellig will keep pushing management to get the share price up. Their ownership is up to 5.86%.

Up 14%, BUY

SuperGen Inc. (NASDAQ-SUPG)-Recommended 10/4/2010)

Buy Price-$2.31 (was $2.09 before adding $10,000)

Valuation $3.11 (was $5.21, $4.89, $4.37, $3.48)

Closed down $.08 at $2.10

Earnings out in July. Despite that the quarter results did not include the results of Astex, they provided good guidance of what the second half’s combined results will be. For the latest quarter, revenue rose to $11.7 million from $9.9 million last year and they made $.01 a share versus $.02 last year. This quarter’s results included $1.3 million of expenses related to the merger. So all in all, it was a good quarter. However, our valuation based on this quarter fell to $3.11 as revenues declined from the prior quarters $17 million.

As we suspected, the merger with the revenue poor Astex will hurt our valuation which does not take into account the massive drug pipeline of Astex. It is not easy to find a small drug company that has a pile of cash, is not losing a ton of money and is trading at even close to our valuation.

There are $2 BILLION of potential milestone payments down the road.

Down 9%, HOLD

Performance Technology (PTIX-Recommended 3/30/2010)

Buy Price-$2.70

Valuation $4.87-(was $4.99, $3.79, $3.87, $5.03, $5.98, $7.13)

Closed up $.22 at $2.02

Earnings out in August. Sales up 15% to $8.5 million and they made $300,000 on a non-GAAP basis. Not bad at all. Cash is $1.23 a share and our valuation fell a tad to $4.87

We think we will hold on to this one a bit longer and see if they can get to a profit.

Down 25%, HOLD

Extreme Networks (EXTR-Recommended 3/22/2010)

Buy Price-$3.18 (Was $3.04 before adding another $10,000)

Valuation-$6.45 (was $5.67, $7.36, $7.23, $7.31, $6.82, $6.81)

Closed up $.21 at $2.84

Earnings out in August. Sales rose about 5% from last year to $89 million and they lost $2 million or $.02 a share after about $4 million of non-cash charges. Cash stayed at about $147 million or $1.59 per share. Our valuation moved back up to $6.45 a share.

Big news in July. EXTR announced they are laying off 16% of their employees and expect $20 million of cost reductions in FY 2012 and allow the company to make consistent double digit operating income. We view this all as good news for the future. Starboard was cleared to buy up to 15% of EXTR as disclosed in an SEC filing in June.

Starboard Value Fund filed another 13D/A in June disclosing that they had upped their stake again to 9.6%.

Down 11%, HOLD

Broadvision (BVSN-Recommended 3/16/2010)

Buy Price-$13.50

Valuation $18.01-(was $21.21, $22.95, $22.31, $21.77, $23.37, $27.15)

$13.14 per share in cash.

Closed down $.51 at $9.19

Now trading $3.95 below cash value. Nuts.

Earnings in July. Not so hot. Sales were down to $4 million (from $5.1 million last quarter), and they lost $1.5 million. Cash per share fell to $13.14. Clearly their social networking initiative has not taken hold yet. This is still trading like a Chinese stock, but it is a U.S. company and it trading at less than cash value. Our valuation however fell to $18.01. Without the fact that BVSN is trading at less than cash, we would likely sell BVSN but will hold on another quarter or two and see if they can produce some decent results.

Down 32%, HOLD

Gravity Company Ltd. (GRVY-Recommended 1/18/2010)

Buy Price-$1.68

Valuation $5.33-(Was $5.61, $5.73, $4.38, $4.44, $5.15)

Closed down $.06 at $1.50

Trading at just 70% of cash value.

June quarterly earnings out in August. Revenues were just under $14 million and they made $.06 a share. Only fly in the ointment was that Ragnarok 2 is delayed until at least Q1 2012. Cash per share rose to $2.10.

Our valuation fell a bit to $5.33 on some margin compression, but at less than cash value and 30% of our valuation this is one good lottery ticket if they ever release Ragnarok 2.

Down 11%, HOLD

AEterna Zentaris (AEZS-Recommended 6/20/2009)

Buy price $1.42 (was $1.78 before adding another $10,000, $1.82 before double up)

Valuation –Speculation.

Closed up $.11 at $1.82

Earnings announced in August. Revenues were up about $900,000 to $6.5 million and their operating loss was about $8 million (compared to $15 million loss last year). AEZS has been diligently selling shares under their announced programs and have about $53 million in cash (but close to 100 million shares outstanding). This is pretty normal for a developing drug company.

Perifosine got a European patent issued, as announced in July.

Oppenheimer put a $5.50 price target on AEZS in June.

Needham also gave AEZS a buy recommendation with a $5 price target.

Earlier this year AEZS announced a partnership for perifosine in Japan. They got $8 million upfront and up to another $60 million in the future. Plus AEZS gets to sell the compound to the company and gets double digit royalties. Not a bad deal.

Riding the tail of Kerx and perifosine, new orphan drug approval from the FDA and a lot of investor interest in their pipeline of cancer products.

Speculative for sure.

Up 28%, HOLD

Spectranetics (SPNC-Recommended 9/2/2006)

Buy price $5.68 (was $8.90, $9.40 before adding $10,000, and was $10.65 before double up),

Valuation –$10.00

Closed down $.03 at $6.02

Earnings out in July. Sales rose 7% to $32.2 million and they actually managed a $.02 profit. Cash rose to $35.7 million.

SPNC announced recently that they finally hired a new CEO. He comes from DaVita, but we were not all that impressed with his resume. I hope he is planning on making a big killing on his stock options at SPNC and not just continuing to screw up like the other current and previous management.

Paragon filed a 13D/A in May disclosing they had upped their stake to 7%.

Up 6%, HOLD

Mediware (MEDW-Recommended 6/4/2007)

Buy Price $6.33, (was $6.52, $6.67 ($10,000 added), $6.98 after double up)

Valuation $16.07 (was $15.04, $14.23, $15.02, $14.35, $12.13, $12.57, $12.29, $11.90, $11.30, $11.48, $11.47 $10.99, $10.28, $13.32, $12.89, $13.40)

Closed up $.32 at $10.33

Constellation has sold a few thousand shares here and there, but appear to have stopped for a while. They have 1.7 million shares left.

Earnings reported in May. Good again. Sales up 8% and they made $.17 per share up from $.11 last year. Our valuation rose to $16.07 per share. They have $3.66 per share in cash.

MEDW announced what sounded like a nice military contract win in April. No details though, so hard to get too excited. Hopefully this and the acquisition will keep their sales and earnings momentum going.

MEDW announced another acquisition in March. No details of what it cost, or what it will do to earnings.

We give up on the sale of the company anytime soon.

Constellation Software owns 21.8%, but put itself up for sale this year. Should have bought Constellation stock, it has tripled since they got into MEDW!

All we read is that medical records will be a hot area, so MEDW looks like the place to be.

Up 63%, HOLD

Vertro (VTRO (was-MIVA)-Recommended 10/21/2007)

Buy Price $8.15 (Was $11.90 before adding another $20,000, $13.10 before another $10,000 and was $15.00 before double up),

Valuation $10.91 (was $12.42, $14.23, $14.76, $12.40, $12.55, $10.85, $8.25, $9.45, $28.05, $32.10, $34.20, $37.90, $37.95)

Closed down $.07 at $1.47

Earnings announced in August. Not great. Sales were down $1 million from last year to $7.5 million and they lost $300,000 ($.05 per share).

Should have sold this when it traded over $6. Our valuation fell to $10.91 and cash per share fell to $.67.

Down 82%, HOLD

Angeion Corporation (ANGN-Recommended 8/28/2008)

Buy Price-$3.82 (was $5.15 before $10,000 added)

Valuation $13.19 (was $13.60, $15.00, $13.06, $12.15, $11.29, $11.73, $11.47, $11.16, $9.53, $13.30, $13.03)

Closed down $.07 at $4.03

Next earnings due out Thursday, September 1st, after the market close.

ANGN announced a distribution contact last week with Novation, where Novation’s 30,000 customer sites can buy ANGN’s products at a discount.

Earnings out in June. Sales flat at $6.8 million and they lost $138,000 or $.04 per share. Blueline Partners still owns 7.6% of ANGN and ought to be pushing on the company to do something about the stock price.

Up 5%, BUY

OB-abies (Bulletin Board Listed Stocks)

As proven by OPTIO, patience is necessary with these stocks.

ARI Networks (ARIS.ob-Recommended 8/19/2006)

Buy price $1.61 (Was $1.78 before another $10,000 added, was $2.06 before double up),

Valuation $5.65 (was $5.39, $4,86, $5.60, $5.73, $5.54, $5.74, $5.96, $4.72, $5.19, $5.66, $5.63, $5.61, $5.71, $5.49, $5.34, $5.03, $5.28, $5.28, $5.21)

Closed at $.66 unchanged

Earnings out in June. Sales were flat at $5.354 million, operating income however jumped to $675,000 from $297,000 and they made $.07 per share (about $.04 excluding non-recurring and discontinued operations). Our valuation jumped back up to $5.65 on higher than expected margins. If they can maintain $.04 per quarter (fully taxed), we should be on our way to having a winner here.

Wake up management–you have a great little company here worth 6X what it is selling for.

Now down 59%, BUY. Still a Huge valuation gap here.

Rand Worldwide (RWWI.ob (Was Avatech, AVSO.ob)-Bought November 28, 2005)

Buy price $.79 (Was $.93, $.99 and $1.19 before adding $10,000-each time),

Valuation $2.60 (was $2.40, $1.90, $2.26 $3.07, $3.03, $2.38, $2.57, $2.81, $2.78, $3.30, $3.76, $4.00 $3.41, $3.05, $2.53, $3.25, $3.29 $2.69, $3.36, $3.81)

Stock closed at $.75, unchanged

Earnings out in May. Sales were $27.4 million and they made $.04 a share. Our valuation jumped to $2.60 a share. Hopefully another quarter or two of positive results will get this over $1.50.

Down 6%, HOLD

CTI Holdings (CTIG.ob-Recommended 2/25/2006)

Buy price $.27 ask,

Valuation $1.23 (Was $.91, $1.21, $.71, $.83, $.88 $.96, $.93, $.75, $.85, $1.57, $1.40, $1.29, $1.38, $1.31, $1.38, $1.29, $1.42, $1.28 $1.13, $1.05, $.82)

Ask price $.09, closed at $.084.

Earnings announced in August. Not bad at all. .Revenues increased from $3.578 million to $4 million and they only lost $.01 per share. The good news is that they got a $7 million prepayment on a big U.K. order and were able to pay off all their debt and end up with $4.65 million in net cash. This is $.16 a share—double the current trading price. VOIP revenues more than doubled to $461,000 from $197,000 last year and almost doubled from $246,000 last quarter. VOIP still lost $545,000 but the loss was $100,000 less than last year. Our valuation spiked back up to $1.23.

At a $2.5 million market cap, this is stupidly cheap. Their intellectual property is probably worth 10 times this price. They need to liquefy this value somehow.

They might have to sell or shut this VOIP business down in our opinion. Just losing too much money, and eroding shareholder value–or it could be a home run.

Still an “undercover” company and stock.

Down 67%, HOLD

Lotus Pharmaceuticals (LTUS.ob-Recommended 12/3/2007)

Buy price $1.68 (Was $1.80 before $10,000 adder, $2.16 before double-up)

Valuation-$1.05 (Was $2.43, $4.11, $4.84, $4.98, $4.60, $3.82, $4.00, $3.68, $3.12, $3.98, $4.44, $3.22, $2.12, $4.56, $4.16)

Closed at $.40, down $.02

Last earnings report in August. Sales were down $200,000 to $18.7 million and they made $.06 a share compared to $.24 last year. Our valuation plunged to $1.05 per share on margin and income declines. Gross margins fell to 26% from 48% last year. We are now worried for the first time that with the decline in net income, that they may be having liquidity issues with all of their capital commitments. If this is going to work, it won’t be until 2012 that we see anything.

Down 65%, HOLD