here is the text from theingerletter.com re INKS from last night---today
hope you like this,he has a very good established track record
Bits & Bytes . . . notes reasonable consolidation by most all tech stocks monitored. Texas Instruments (TXN), Motorola (MOT), and Intel (INTC) all consolidated during the past week, and then advanced slightly. Essex (KEYW) showed greater volatility in its behavior lately; typical for the issue (which also joins the Russell 2000 this go-round). KEYW acted superbly on Monday (over 1.50 up) and on Tuesday as well. It is at an all-time high now. Ionatron (IOTN) consolidating price movement over 8.70-75; confirming a suspicion that preceding dips towards lower 8's were exhaustion light-volume moves that would precede renewed upward action. There is no news, but no sellers evident; and we are satisfied with the current action, looking for rangebound stability and then upside possibly later this week (that could be a contest between short-sellers covering in the face of potential Russell-related buying; even slight selling of a type related to those who bought early-on in-anticipation of the Russell listing buy pulse. We suspect those are not 'neutralizing' factors however, and that on-balance it resolves to the plus side as the week evolves. The pullback currently is not particularly worrisome, and technically could argue 7.95-8.05; but doesn't have to as there are overriding factors to consider pending in the almost immediate future.
It's just my personal observation, but suspect we'll see a quick run-up back to 9 soon. It is my impression that we had a dip from a 'head & shoulders', washed-out as noted in the 6's, ran up to over 9, but couldn't get above daily resistance (at the time, as yet). It is my further suspicion that while it can be argued either way (price movement now) because we are basically in the 'armpit' of the 'head & shoulders', the resolution most likely ought to be to the upside, not the downside, because of the basic factors that surround this stock. A rebound to an 'armpit' leaves an intact H&S until it doesn't of course; but in our view the leg up (from a structured short-term bottoming) was also a likely initiation of a full intermediate move up, and not just a rebound. That's why the critical nature of moving over the resistance overhead, and when that occurs (if we'll say to be balanced) the shorts will scramble, and theoretically run-ups occur.
As to the company; there is an Annual Meeting next week, which is supposed to be just a formality at the firm's lawyers offices in New York City. However, considering a number of open issues and the lack of recent transparency (primarily due to security issues the Government imposes on the firm), we would welcome the firm conveying to shareholders some sort of outline of where things stand (as Government permits). For instance, some clarification on contract progress, delivery times, and certainly a bit of an outlook as to overall growth and development prospects vis-à-vis LIPC, not just JIN, for sure would be welcomed. In essence; an update on the overall 'feel' for where things stand would potentially go far to assuaging shareholder anxieties that certainly are understandable on a fairly young company such as this fascinating one.
Early Monday, Essex (KEYW) filed a new 'shelf-offering', which authorized (but does not yet determine if or when, but the ability to sell) $100 million worth of additional shares (about 5 million shares). That creates an implied potential dilution, which one might think would send the shares lower. Nope; as we've often noted with respect to folks worrying about offerings in certain other 'growth' (not struggling) companies, it all depends what the company plans to do with the money. That's not known as yet.
However, Essex has no urgent need for cash; their management might comtemplate issuing proposed shares after a new forthcoming deal is announced, which drives the share price higher, and then it only pulls back (from a higher level conceivably) on the announcement of a possible deal, which might be viewed favorably, inherently so as to minimize dilutive effects of the offering. This would be good business practice, and the raising of money to fulfill an important growth aspect of a business isn't bad news.
While we certainly do not know what a company has in mind, we do know lately there were rumors Cisco Systems (CSCO) might be considering a partnership with Essex to initially or exclusively distribute Essex's Hyperfine WDM (wave division multiplex) which allows for delivery of encrypted information at a speed about ten times that of current technology Cisco is able to offer presently. That rumor was incorrect (at least as regarded today). Nothing of the type was announced by Cisco today; both rose. Regardless, the price action of Essex is absolutely just excellent.
Now for tonight's special segment:
Occasionally we add a stock outside of well-known big-cap technology leaders, that we keep an eye on. Even more infrequently we take a look at small-cap issues, that are thought to have either a particular niche position in a sector, or potential over time (or conceivably both). In this respect Ionatron was the only OTC stock in recent years in which coverage was started even before it became Nasdaq small-cap. It has made it all the way to the Nasdaq National Market and even to the Russell 2000 now.
However that is an exception (and it was a most interesting exception) to the rule for such stocks; which basically is to avoid anything under $5 a share, and typically not to consider anything at all prior to (if ever) inclusion in the Nasdaq small-cap sector. The vast majority of 'penny stocks' and sub-small-cap listings, don't make it, often are either manipulated or simply struggling, or it's difficult to find accurate information on.
A few do work; and here and there everyone hopes that a smattering of 'Vegas-size' bets on several of these (though inherently done quite selectively) might culminate with objectives lots of speculators eventually want to find, with a small portion of their 'highest risk' wagering capital; the proverbial 5-bagger, 10-bagger, or more. It is very necessary to point this out before writing about any OTC stock. While every stock is a speculation to some extent (though many don't think so, they'll learn one day that for sure most things in life, including houses and property are too), OTC companies are often harder to track, subject to the machinations of market-makers and of course are often inherently volatile (in either direction). With this caveat, and caution that a total of speculations in OTC stocks should be viewed as 'gambling', and not core portfolio investment holdings, let's go forward, as you may see why we suspect something just lately catching our eye has theoretical potential that may differentiate it from the pack.
Thus, every now and then something comes to our attention that suggests an early or 'toe in the water' position could be of speculative interest and potential. Many players will probably remember Sensormatic; it was one of the successful pioneers of what evolved into RFID tags; the familiar plastic tags that had to be removed from garment or other items upon leaving a retail store so the alarms weren't set-off. It was sold to Tyco eventually. Until then for awhile it was a very interesting equity play in its own right (at the time we speculated successfully in Sensormatic, and exited well before the later acquisition). The field has really matured since then, and remains fairly 'hot'.
The experiences of Tyco are irrelevant; the point is what Sensormatic developed into. This aroused a bit of recent curiosity to discover some of those original Sensormatic savvy guys involved in a very tight-lipped operation that potentially could be the next phase or generation in all kinds of 'bar-code' related security enhancement advances. (A member -not the shadow- first mentioned this stock, but it was only upon digging that we found connections with the old Sensormatic team; who are now experienced and seasoned in the field, and we suspect capable of mounting a top-notch project.)
Beyond that, it was the awarding of 'two' (potentially) key novel U.S. Patents (not just 'applied for'; but actually awarded) just last week that particularly causes attention to be focused now, rather than waiting to see if they progress over the next year or two. The patents cover .. 'chipless' RFID. Think about it. The prohibitive cost for low-price goods using RFID for security, inventory control and anti-counterfeiting efforts, often is the cost of embedding an RFID chip into or upon the goods, item, merchandize or document (such as a ticket for a sporting event or an airplane flight even), which is a prohibitive expense for low-cost or mass-market applications. Even pharmaceuticals could be handily controlled if a 'chipless' RFID encoding were possible (both relating to authenticity as well as monitoring where they are; not to mention even hospitals).
We think this is facilitated both by the patents issued to this new company, and also from their prior experience with security encoding or anti-counterfeiting (yes 'covert' in style) proprietary technologies, many of which are covered by an earlier patent and in use currently (though customers sometimes don't want this broadly discussed, so a would-be counterfeiter won't be alert to the possibility of what security to look for).
While the 'chipless RFID' is the 'sizzle' that caught our attention, the steak for now is the bar-code proprietary ink solutions, which could ideally be the residual cash-flow to let this company prosper as it moves towards new-generation 'chipless RFID' realms.
The 2 patents are entitled 'Chipless RF Tags' and 'Radio Frequency Data Carrier and System for Reading Data Stored Therein'. What this in theory does will enable non-contact and non-line-of-sight automatic scanning (or conveyance) of product and logistical or other information. And if successful it would do it without the imbedding of relatively expensive old-style (or competing) RFID tags. How's it done? Interactive ink basically. Or call it digital ink. Potentially this makes item-level tagging practicable for the first time, at per-imprint costs of just a small fraction of conventional RFID chips.
Of course cost is the key to success of this pending product, plus the presumed ease of incorporating this within the 'bar codes' so universally applied to virtually everything everywhere. What the company does is provide scanning equipment (which they will do the final assembly of outsourced components) with residual revenue important; it's from the sale of specialized inks and 'chipless' encoding. An example comes from the earlier product sale (the company's about five years old) to the Istanbul (Turkey) bus company. Turkey paid about 2.5 million to put scanning boxes in the city's buses; at the same time as the system really becomes meaningless without consumables that are provided by the company on a regular basis (that was a 5-year contract expiring this year, which the company anticipates a renewal of, though they're focusing on the bigger markets and other product areas with their more advanced technologies).
As to financials, they have cash on hand, have financed (conventionally) through the private-placement area and so far don't have major issues we can detect with respect to dilution. However, at some point in their growth, offerings to raise capital expressly for build-outs of new production and servicing facilities would be reasonable to expect we think. For now the company is in the process of moving their HQ to Ft. Lauderdale Florida from New York. A subsidiary will take care of business in Europe, and they'll continue to maintain their ongoing 'research & development' operation in Science Park in Rehovot, Israel. My understanding is that most of the executives this summer (not yet in Florida) will be moving to Fort Lauderdale, where office space is already opening in the Cypress Creek business area, and with (I presume) assembly nearby.
So who is this slightly 'covert' mystery company? InkSure Technology Inc. (INKS) is on the 'OTC bulletin board' (pink sheets); and we hasten to point out that is often not the easiest market to learn information or easily trade in. Ideally that will change. The company's 10Q's and so on and their website (inksure.com) are business-like and of a caliber (along with the trademarked product line) that suggests a bigger company in the offing. We suspect so; though this is not seen as a 'flashy' stock or quick hit (that is a positive in our view); since they appear to be a serious group of well-assembled guys determined to be a player in the very large anti-counterfeiting, security, ticketing or documentation and inventory control fields. (We think that's 'Sensormatic talking' in the background of a professional demeanor.) Competitively we view that favorably.
Something else we like: this company (so far) is very low-key; nobody seems to know anything about it. That's good. The inference is that we're early, not late to the table. I hope not too early, but that's hard to tell. Last week they announced (after the patent awards) their biggest sale yet; to Sun Chemical (world largest specialized ink maker by the way, and private), and we are concerned about waiting too long, lest they nail a big account in the pharmaceutical, currency, sports, airline, or retail areas. Also the risk (or opportunity) of a small company like this being swept-up by a major player is a prospect if this all pans-out well; though that would not necessarily be a negative. It is our 'take' at first-blush that they're interested in building the business; not selling it for just limited gain. And that they aren't promoting it as many OTC companies do, is a plus we think (in believing it's an actual business being developed; not a stock deal or other kind of situation primarily, which we disdain in the markets). Can't be certain, but it sort of just feels 'for real', and seems to be a business with the ducks being well lined-up, in preparation for going after serious National accounts that need security.
From time-to-time members have asked about out take on the RFID sector, and our answer normally is that we are solely represented by our major holdings like TXN in the field. And that's so. We have avoided the crowded micro-chip field. However this is sufficiently differentiated, especially in the 'chipless RFID' aspect of their business, on-top-of the likely equally serious anti-counterfeiting document protection operation activities (for instance the Turkish bus ticket business; some say 10-20% of all tickets were counterfeit; so with such situations world-wide a risk, there's an obvious role for countering such forgeries in ways that are intrusive while also being invisible to users of legitimate documents and so on). You could only imagine if China would encode all software sales accordingly (right..). So this is our unique speculation for the field.
One reason the company may be moving most of their activities to Florida is that it's required to be a (mostly) American company for certain security document services sold to the U.S. Government. We don't know if they'll be heavily involved in document security (like passports or driver's licenses), or currencies, checks, securities; but it is possible. They believe the most receptive market segment will be customers which have experienced problems with counterfeiting, data theft, and have been unable to reduce or eliminate the effects of counterfeiting through authentication solutions that are more easily circumvented than the covert security features InkSure can provide.
At this point it appears the products are multi-disciplinary technologies based on both chemistry and printing, as well as software and electro-optics. Most of it is proprietary but we are given to understand that a 'clerk' can scan and verify a ticket or item in no more than about a second, with no particular knowledge or skill (they get a 'yes or no' as far as authentication, and then call a supervisor presumably if there's a problem of a security or counterfeiting type). Simply put; we don't know if this is the 'holy grail' for the RFID industry, but it is competitive. However just WalMart's determination earlier this year, that all WalMart goods will have RFID tags, says enough. Now imagine it at a fraction of the cost WMT's envisioned. Enough for now; more as available. Thus:
We initiate coverage on a speculative OTC RFID candidate: InkSure (INKS). Price is around 1.95-2.05 on the OTC 'bulletin board'. The stock's relatively thin. Any that determine to 'play' this stock should be cognizant of the limitations of the OTC, thus a limit order approach should be maintained for all purchases and sales. Our initial goal for the shares will be the 3-4 area; with clearly some suspicion that this may be really a speculative retention for the longer-term; with prospects dependent on contracts as the company grows, as well as financial transparency on the part of management; a sensible financing approach to grow the business, and an effort to move to NASDAQ. It is impossible to say if this occurs, where it may go down-the-road; or if their results will grow fast enough to move it to regular Nasdaq in the reasonable fullness of time.
Price action: shares were slightly higher than current levels a week ago; gapping-up on 'twin patent' news which made some RFID industry publications; then settled back a bit. Hence shares down to just about fill the gap, leaving no special premium for the announcement of the patents (back to the breakout or conceivable support point), it's a decent point for new nibbling we suspect. INKS all-time high was after it became a public vehicle under this name (a reverse-merger, albeit apparently a 'clean one' of a shell previously held by a child toilet-training firm, which had basically evaporated), in 2002, at around 2.50. Subsequently dropping to under 1, it gradually worked back up as business was reoriented and generated. Revenue, while small at 400,000 in the last quarter, has the right direction (a double, year-over-year) and any new contracts aren't reflected (nor is information readily available). Volume increasing steadily from the average. There do not appear to be unusually high salaries, option structures or other impediments to speculative interest, from what can be gleaned at this point. If it continues to be well (but aggressively) managed to forge ahead before competing or even newer technologies come along, it could establish itself as a new 'benchmark' if they do things just right; maximizing comprehension of the technology's versatility.
Full disclosure: yours truly has a nominal 'toe-in-the-water' initial position at current (some slightly higher, some slightly lower) levels. For now it's our intention to retain this small position as an investment speculation to see what the InkSure boys can deliver, and determine later if this is to be another Sensormatic (as to potential), or just another stock that meanders around (and hopefully higher). If it becomes a 'hit' in the sector, don't be surprised if our attention to the company and coverage, increases over time, particularly if management is able to move it to the NASDAQ eventually as a small-cap, and with an eye on National Market representation if business warrants.
Also we'll be watching to see if they show respect for shareholders as well, by limiting dilutions, being as transparent as feasible, and maximizing shareholder return. Our first take on their public pronouncements is a positive one. It might be added, lastly, that there is no major 'message board' or 'analyst coverage' yet that we can find, and if evolves satisfactorily, we suspect we'll have been the first American analyst (it may have been covered in Israel, we don't really know) to initiate monitoring or coverage. So maybe a ground-floor entry; if this is successful. Hard to say; speculative for sure.
Members please note: we have no association with IOTN or for that matter any other publicly traded firm (never have had) other than as shareholders of course. Yours truly remains an Ionatron shareholder throughout coverage timeframes, as regularly noted. Comments are interpretative speculative postulations, provided 'as is with all faults', and all risks, with no assurance about future performance of anything in any way whatsoever.
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