Once Promising Battery Maker A123 Systems Now Focus of Controversial Auction

Many media eyes are watching the auction of bankrupt battery-maker A123 Systems, which is currently underway in Chicago. Bids were accepted starting December 6, but the auction apparently could run into next week before a buyer is announced because of the complexity of the deal.

Some of those watching, also including politicians and military leaders, have expressed concern that the A123 lithium ion battery technology, much of it funded by the U.S. government, could wind up in foreign hands, according to

Photo courtesy of AP

Photo courtesy of AP

the Chicago Tribune (http://www.latimes.com/business/la-fi-a123-auction-20121206,0,359683.story). The Tribune notes that A123, which was once called “one of the most promising U.S. innovators in the clean fuel auto industry,” was awarded a $250 million grant in 2009 and had drawn down about $132 million of it before bankruptcy.

While none of the companies has commented publicly since the bidding opened, four suitors, including one American company, have qualified to bid, according to the Tribune story and other reports: Milwaukee-based Johnson Controls (NYSE: JCI) is the American company and NEC Corp of Japan, Siemens AG of Germany and Wanxiang Group Corp of China (the largest automotive components maker in China) are the others. The Tribune notes that Johnson Controls bills itself as “one of the last standing American companies competing in and building this U.S. advanced battery industry.” (New Castle, PA-based Axion Power International, among some others, would argue with that statement. See below)

As we noted back in August, Wanxiang made a bid to buy A123 back and thought they had a solid agreement, according to the Tribune. But apparently, due to concerns politics would be problematic, A123 never agreed to make the deal.

Other companies are apparently interested in buying parts of A123, according to the Tribune, but no names have yet been made public.

There are a few small cap battery makers that could be considered peers of A123, although most of them are not in the lithium ion battery business. They include:

Newark, NY-based Ultralife Corp. (Nasdaq: ULBI, http://www.ultralifecorp.com/) designs, manufactures and offers services for power and communications systems, including rechargeable and non-rechargeable batteries as well as communications and electronic systems and accessories, and custom engineered systems. ULBI operates in two segments: Battery and Energy Products, and Communications Systems. The battery segment includes lithium 9-volt, cylindrical and various other non-rechargeable batteries, as well as rechargeable batteries. ULBI has a 52-week trading range of $2.39-$5.50 and a market cap of $46 million. It closed Dec. 7 at $2.62, down 8 cents on the day.

Salt Lake City-based Oak Ridge Micro-Energy Inc. (OTC: OKME) is a development stage company that licenses thin-film, solid state batteries for industrial, medical and government applications. The applications include wireless smart sensors, security cards, RFID tags, semiconductor memory chips and implantable medical devices. The thin-film lithium and lithium ion batteries are ideally suited for a variety of applications where a small power source is needed. OKME has a 52-week trading range of $0.06-$0.51 and a market cap of $20 million. It closed Dec. 7 at $0.20, down 3 cents for the day.

Carrollton, TX-based Universal Power Group (AMEX: UPG, http://www.upgi.com/) is a supplier and distributor of batteries and related power accessories. UPG sells, distributes and markets batteries and related power accessories under various brands and its own brands. Back in August, UPG’s market cap was $11 million and was trading for about $2.15. Its current 52-week trading range is $1.26-$2.35 but its stock has fallen. It closed Dec. 7 at $1.66, down 3 cents for the day. Its market cap is now $8.3 million.

New Castle, PA-based Axion Power International * (OTCBB: AXPW.OB, http://www.axionpower.com/) manufactures high-performance, low-cost lead-carbon (PbC) batteries for a variety of markets, including mild- and micro- hybrid vehicles, which may be the commonest form of hybrid in the US within a couple of years (and already the most common in Europe). AXPW announced in May that the U.S. Department of Energy had awarded it a $150,000 grant toward the commercialization of its PbC batteries for micro hybrids. PbC batteries are as easy to manufacture as the older lead-acid batteries, but they use activated carbon instead of half the lead and are lighter, 100% recyclable, have a higher charge acceptance and faster recharging rates, all ideal for the micro-hybrid and mild hybrid markets.  AXPW has a 52-week trading range of $0.20-$0.64. It closed Dec. 7 at $0.30, no change on the day.

*Denotes a client of Allen & Caron Inc., publisher of this blog.

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Market Study Projects Global RFID Market to Reach $18.7 Billion by 2017

The technology used in Radio Frequency Identification (RFID) is not new, but global business continues to find additional lucrative applications for its use. Security and access control were among the initial drivers of RFID technology but now such applications as product security, inventory, production efficiency, shipping and importing, food safety, aviation and retail, just to name a few, are making use of RFID. A new market study by Global Industry Analysts has projected the world RFID market will hit $18.7 billion by 2017.

The small cap world is loaded with companies that use RFID technology as important parts of their business models.

RFID reader courtesy of Tootoo.com

Here are a few names, selected completely at random, that may be worth checking out. Remember: we are not recommending anything, but solely identifying some small companies that are publicly traded.

Israel-based B.O.S. Better Online Solutions (Nasdaq: BOSC, http://www.boscorporate.com), founded in 1990, provides an entire array of mobile and RFID solutions and supply chain solutions for enterprise logistics and organizational products. Its customer base is global but its market cap is tiny, only $2.95 million as of March 20. At mid-day March 26 BOSC stock was trading at $1.04, down 1 cent on the day, near the the bottom end of its 52-week range of $0.58-$3.67. If you’d like to learn more, tune in to the company’s fourth quarter and year-end conference call at 4 p.m. Israel time March 28.

Port Townsend, WA-based Intellicheck Mobilisa (AMEX: IDN, http://www.icmobile.com) provides commercial applications for reading and verification, government sales of defense security and identity card applications and develops wireless communications applications. Its products come in three areas: commercial identification, defense security and wireless applications. IDN bought Positive Access Corp. in August 2009. One product, IDv-Check, helps read and verify California and Canadian drivers’ licenses, among other things. At mid-day March 26 IDN stock was trading for $1.66, up 1 cent on the day, so far setting a new 52-week high. Low end of the range is $0.81.

Everett, WA-based Intermec (NYSE: IN, http://www.intermec.com) is a global business that designs, develops, integrates, sells and resells automated identification and data collection products and related services. Products include mobile computers, barcode scanners, printers, RFID products, among other things. On March 13, IN introduced two new desktop printers “perfect for space-constrained settings,” according to a press release. At mid-day March 26 IN stock was trading at $7.81, up 10 cents on the day. Its 52-week range is $5.87-$12.21 and its market cap is nearly $465 million.

Santa Ana, CA-based Identive Group * (Nasdaq: INVE, http://www.identive-group.com/) is a seller of physical and logical access control products, RFID products and identity management. CEO Ayman Ashour has built the company through acquisitions after coming over from HID Global, a division of Stockholm-based Assa Abloy, a major competitor. Identive is followed by several sellside research analysts.  At mid-day March 26 Identive was trading at $2.03, up 19 cents on the day. Its market cap is about $105 million and 52-week range is $1.37-$5.90.

* Denotes a client of Allen & Caron, publisher of this blog

Don’t Get Caught in a Bear Trap; ‘The Bulls Will Rule September’

Today up triple digits. Tomorrow down triple digits. With the wobbly, volatile markets careening back and forth on a daily basis, several prominent investors separated from the pack this week and stepped boldly forward to suggest this is a time of “huge” opportunity with a strong bull market on the horizon.

One strong bull is Otis Bradley, who we have covered in the past and who continues to shuck off all chattering naysayers with his optimism. He called Tuesday, Sept. 6, “a truly remarkable day.” The Dow Industrials started off the day down more than 300 points and the S&P 500 threatened to break below “incredibly important” support levels. But the market roared back late that day, which Bradley sees as a very important sign of what’s ahead:

“The Transports rallied from minus 168 to minus 62; the Nasdaq f rom minus 66 to minus 7; the Russell 2000 from minus 20 to minus 2. That is not what a Bear Market–Secular or otherwise–would do.”

The swings in the market that continued throughout the week suggest how a bear market “rebounds from a Bear CORRECTION (emphasis his), not a secular bear.” Bradley goes on to suggest the past summer, especially August, represents a “huge buying opportunity” and a “significant Bear Trap.”

Then Forbes contributor Ali Meshkati posted a story on Sept. 7 with a headline “Look Out Bears, the Bulls Will Rule September” (http://www.forbes.com/sites/investor/2011/09/07/look-out-bears-the-bulls-will-rule-september/?partner=yahootix). He notes that “A move to 1300 or thereabouts on the S&P 500, as unlikely as it seems now, becomes extremely likely given the herd mentality and cookie cutter asset allocation models that fund managers follow in today’s version of Wall Street.”

We’ll watch and wait and see. In the meantime, here are four of Bradley speculative smallcaps:

Santa Ana, CA-based Identive Group * (Nasdaq: INVE, http://www.identive-group.com/), a seller of physical and logical access control products, RFID products and identity management. CEO Ayman Ashour has built the company through acquisitions after coming over from HID Global, a division of Stockholm-based Assa Abloy, a major competitor. INVE, with a market cap of about $108 million), closed Sept. 8 at $1.87. Its 52-week range is $1.37-$5.90.

Richland, WA-based IsoRay (AMEX: ISR, http://www.isoray.com/) manufactures and sells isotope-based medical products and devices to treat cancer, particularly brachytherapy seeds. ISR closed Sept. 8 up 5 cents to $1.16. The 52-week range is $1.73-$0.78.

West Palm Beach, FL-based Quepasa Corp. (AMEX: QPSA, http://quepasa.com/) operates quepasa.com, a social website for young Hispanics. Quepasa closed Sept. 8 at $4.50, down 13 cents. Back in late January is traded for $15.45, up from $3.35 last September.

Glen Allen, VA-based Star Scientific Inc. (Nasdaq:CIGX, http://www.starscientific.com/) has developed a tobacco technology that prevents the formation of carcinogenic toxins and also develops and markets some tobacco products. CIGX has been up and down several times. CIGX was trading at $4.08 on May 17, up from below $2 as recently as March. It closed Sept. 8 up 17 cents to $2.73. A few days ago (Sept. 6) it was named “one hot stock to avoid” by Motley Fool (http://www.fool.com/investing/general/2011/09/06/1-hot-stock-to-avoid.aspx).

Ft. Lauderdale, FL-based MAKO Surgical (Nasdaq: MAKO, http://www.makosurgical.com/), a maker of advanced robotic orthopedic devices, has been on a roll. It closed Sept. 8 down 87 cents to $37.13. When we last checked, on May 17, it was $27.14. Its market cap was $377 million on Sept. 14, 2010; by May 17 it was $630 million and on Sept. 8, 2011 it was $1.54 billion.

Scotts Valley, CA-based VirnetX Holding Corp. (Amex: VHC, http://www.virnetx.com/) is a developer of software and technology for securing real time security solutions over the Internet. VHC had been on a tear until late summer. In November 2009 it was trading at $1.95. By last Sept. 14 it had jumped to $11.16. By May 17 VHC was trading for $23.34 and has been as high as $41.77. But the market corrections hit VHC pretty hard. It closed Sept. 8 down 55 cents to $21.41.

Salmonella, Melamine, Mad Cow: Do Food Chain Problems Offer Opportunities?

The latest food safety scare, in which nine people have so far died from salmonella linked to tainted peanut butter, may have received less attention from the general public that you’d expect due to the enormous coverage devoted to bank bailouts and stimulus packages. But it seems to have reached critical mass among members of Congress who are calling for new food safety regulations. That the peanut plant in question was not forced to disclose past violations to the FDA seems like it might be a heavyweight final straw on the proverbial camel. http://www.usatoday.com/money/industries/food/2009-02-11-peanut-food-reforms_N.htm

Since the Mad Cow scare of late 2003, the Agriculture department and the beef industry have tussled over a system that would trace tainted beef to its original source. A National Animal ID System has so far been voluntary; there are signs, however that the recent momentum for more food oversight could lead to mandatory changes.  If that happens, South St Paul, MN-based Digital Angel Corp (Nasdaq: DIGA, http://www.digitalangel.com) could see further adoption of its wide range of animal identification tags and growing RFID tracking systems. Some analysts note this latest food scare could provide a boon to RFID. http://computerworld.com/action/article.do?command=viewArticleBasic&taxonomyName=security&articleId=332796&taxonomyId=17&intsrc=kc_top

 The microbiology food testing market is expected to grow at a healthy 5.6% annual rate over the next few years. http://www.bccresearch.com/report/FOD011E.html.  Newark, DE-based Strategic Diagnostics (Nasdaq: SDIX, http://www.sdix.com/) provides a suite of diagnostic tests for seeds, grains, processed food and pathogens. Trading for $1 and near its low (down from $5.20), most of its upside remains ahead of it, should it receive more contracts as a result of new mandated testing.

 Lansing, MI-based Neogen (Nasdaq: NEOG, http://www.neogen.com/) labels itself  a “One Stop Shop For Food And Animal Safety Solutions.” In December it did something not seen often these days when it announced a new share repurchase program. The stock of this $383 million market cap company is trading at $26 – midway between its yearly low and high ($31.95).

 Rockville, MD-based Synutra (Nasdaq: SYUT, http://www.synutra.com/) rounds out the tainted food theme of this blog – but for a different reason. SYUT provides infant formula in China and it was one of the 22 producers whose products contained melamine, which was involved with infant deaths and hospital visits. The stock, at $8.65 mid-day 2-12, trades close to its 52-week low, down from a high of $52.24.  Investors who believe that China’s actions can bring back confidence to the infant formula market may want to take a look at this stock, which has distribution in 29 Chinese provinces.

RFID — TI Layoffs, Animal Tags Charge Ahead

In manufacturing news Tuesday, Dallas-based Texas Instruments (NYSE: TXN, http://www.ti.com ). one of the leading manufacturers of Radio Frequency Identification technology (RFID), announced that it would be eliminating 3,400 positions, but said that it is not withdrawing from the business.  TI will continue with its asset tracking, livestock and automotive sectors, and says that their customers will not feel the impact.  TXN shares closed yesterday at $16.02, just under half their 52-week high of $33.00.

Given their already-low share prices, that news didn’t seem to impact companies who are manufacturing RFID technology for use in livestock tracking.  And more than ever, there is an explosion of marketers and distributors offering RFID technology. However, it appears that not all cattleman share the same enthusiasm for incorporating the RFID technology into their programs, and the progression of a national system has slowed as technical and political issues have surfaced.

In 2003 Kansas State University (KSU) began conducting a cooperative project with the USDA Animal and Plant Health Inspection Service (APHIS, http://www.aphis.usda.gov/) to evaluate these technology issues and provide producers with an unbiased database of performance results for RFID manufacturers and their products.

One such manufacturer, South St .Paul-based Digital Angel (Nasdaq: DIGA,  http://www.digitalangel.com/), now offers ranchers and other producers of livestock a new tool for tracking locations of animals in real time with greater precision.  The Minneapolis Star-Tribune covered the product introduction this week: http://www.startribune.com/business/38719137.html?elr=KArks7PYDiaK7DUdcOy_nc:DKUiD3aPc:_Yyc:aUU

DIGA shares closed yesterday at $0.56, down from a 52-week high of $7.68. Current market cap is just under $9 million with an estimated 2008 revenue of about $78 million. Current estimates at http://www.thecattlesite.com and  http://www.thepigsite.com are for larger livestock herds and lower feedstock prices in 2009, both in the USA and Canada.

Digital Angel announced that their battery-powered animal ID tag, known as the “r.Tag,” can be read from 100 feet away, and allows more efficient, accurate livestock tracking than is presently available using other tags.  The contrast to previous tags is striking, because in order to read older tags, a reader had to be within inches of the animal, which meant that all animals had to be herded down an extremely narrow chute whenever they were to be counted.And even then animals could only be identified one at a time.  With the new r.Tags, animals can be recognized in groups a third of a football field away.  

The new battery-active tags are weatherproof, and each interrogator is powered by a small solar panel that charges an onboard battery so the reader can operate for up to two sunless weeks.

 Although APHIS does not require the use of RFID for tracking livestock, it does recommend the technology as a part of the National Animal ID System, a voluntary tracking system.

Other manufacturers using RFID technology to track livestock include Dallas-based Allflex (http://www.allflexusa.com) and Farnum Ztag Products (http://www.farnamlts.com/), both privately held companies.

Dale Blasi, who heads the KSU project, said that “there are good products out there, new products yet to be tested, and products that need to be removed from the supply chain.”