April 2006

Compiled and written by
Gary Will
E-mail:
gary@garywill.com

Issue 110 -- May 1, 2006
In this digest:

1. Virtek reports first annual profit in five years
   
2. Accelerator Centre opens with new CEO
   
3. Dalsa shows some strength in traditional weak quarter

4. ARISE placement raises $3.85 million
   
5. RIM sales slowed by NTP uncertainty
   
6. Symbility parent hopes to raise $5-8 million

7. Descartes makes Ottawa company its first acquisition since 2001
   
8. STOCK REPORT: Big returns on promising signs at Virtek, Dalsa
   
9. Miscellaneous tidbits from DiskStream, Desire2Learn, TurboSonic, Com Dev, iAnywhere, Christie, SlipStream

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Virtek reports first annual profit in five years
April 20, 2006

In the year ended January 31, 2006, Virtek reported net income of $894,000 ($0.03/share) on sales of $51.9 million. That's its first annual profit since fiscal 2001, and the company had racked up $25 million in losses over the previous four years.

Sales were up 10% from 2005, breaking the company's sales record set in fiscal 2004 and achieving the forecast it set of $50 million in revenue.

The fourth quarter saw sales jump 37% sequentially to $14.9 million, a 14% improvement from the previous year. Q4 net income of $798,000 ($0.03) was significantly boosted by a $629,000 income tax recovery. Income from operations was just $109,000 after a $0.6 million foreign exchange loss.

Operations generated $2.9 million in cash in Q4, giving Virtek net cash of $3.2 million at year-end, up $2.3 million from the end of Q3. The company used $0.6 million in cash to pay down its bank debt in the quarter.

Virtek ended the year with 174 employees worldwide.

Accelerator Centre opens with new CEO
April 19, 2006

Five years after it was first announced, the Accelerator Centre at the UW Research & Technology Park will have its formal opening this month. There's been a change in management at the centre, with Gerry Sullivan taking the reins as the first CEO.

Founding executive director Dan Melymuk became seriously ill a couple of months ago and was unable to continue in the job which he had just started in September. Melymuk moved to the area from Indianapolis after being selected as the top pick to run the Accelerator from a deep roster of applicants.

Even though his time in Waterloo was brief, Melymuk was able to make an impression, particularly in his role as a mentor to one local entrepreneur. Unfortunately, we never really got to see him at his best. He was put in a position that would have challenged anyone, especially coming to the area cold and not knowing the people here ... or being known to them.

Sullivan won't have that problem -- he's been part of Waterloo's tech-and-academic community since 1980, and before that received his bachelor's degree at UW. He's been a UW professor, CEO of a UW spin-off company, and a repeat entrepreneur, most recently with Priiva Corporation.

In 1996-97, he was one of the leading forces behind the creation of CTTAN, the CTT Accelerator Network. It became part of Communitech in 1998 (and evolved over the years since then into the work that I do to assist early-stage companies and entrepreneurs).

The formal opening of the Accelerator Centre is scheduled for May 18.

Dalsa shows some strength in traditional weak quarter
April 27, 2006

Dalsa bounced back from a poor Q4 to report net income of $2.6 million ($0.14/share) on sales of $46.6 million in the quarter ended March 31 (Q1 06). Sales were up 12% from the previous quarter.

Dalsa's digital imaging business continued to be the main money-maker, with a $2.7 million profit in the quarter. After reporting a loss in Q4, the semiconductor business was back in the black with net income of $1.0 million.

Digital cinema lost $1.1 million and reported a sequential decline in sales, although it recorded its first revenue from a commercial shoot. The company says it has a two year lead over the competition with its Origin digital movie camera. According to a Dalsa release, at least eight companies at the 2006 NAB conference in Las Vegas used footage shot by Origin to demonstrate their own digital capabilities.

Operations provided $3.7 million in cash and Dalsa spent $2.4 million to acquire additional land in Waterloo and another $1.8 million on capital assets, while paying down $1.5 million in the long-term debt associated with the Coreco acquisition last year. Dalsa ended the quarter with $1.0 million in cash, down $1.5 million from the end of Q4.

ARISE placement raises $3.85 million
April 19, 2006

ARISE, which has been operating on fumes for over a year as it desperately tried to raise money, finally hit the jackpot with two private placements that grossed $3.85 million.

ARISE sold 12.8 million units at $0.30 each. Each unit consists of a common share and half a purchase warrant. Each warrant entitles the holder to purchase a common share for $0.35 over the next two years.

The company now has more than twice as many shares outstanding -- nearly 29 million -- as it did at the beginning of the year. If the warrants are exercised in full, that will add another 6.4 million shares to the total.

With its share price up 58% so far in 2006, that gives ARISE a market value just over $17 million -- a 228% increase since the end of 2005. Not bad for a company that is essentially in a pre-revenue state with a high-efficiency PV call technology in development that will have to clear some significant hurdles before it can be brought to market. ARISE still hopes to start shipping product sometime in 2007.

The company hasn't filed its year-end financial statements yet, but as of September 30, it had a working capital deficiency of $2.5 million, or $2.3 million excluding deferred revenue.

RIM sales slowed by NTP uncertainty
April 6, 2006

The impact of the NTP litigation and the effect it had on customers was seen in RIM's results for the quarter ended March 4 (Q4 06). The settlement was made the day before the end of the quarter, which was also RIM's 2006 fiscal year-end.

There were only 625,000 new BlackBerry subscribers added during the quarter. That was down from a weak 645,000 in Q3 and substantially below the company's forecast of 700,000-750,000 (which already was lowered from initial projections of 775,000-825,000). Over the last half of the year, RIM shipped 2.2 million devices but only signed up 1.3 million new subscribers.

Total sales of US$561.2 million were flat from the previous quarter and up 39% from last year.

Net income of US$18.4 million (US$0.10/share) came after a US$162.5 million expense for the balance of the US$612.5 million settlement paid to NTP. RIM ended the quarter with US$1.2 billion in cash -- and that's after paying off NTP.

For the year, RIM's sales of US$2.1 billion were up 53% from the previous year. The company earned US$382.1 million (US$1.96/share).

RIM is forecasting sales of US$580-610 million in the current quarter, with 675,000 new BlackBerry subscribers -- a number well below what many investors had expected to hear.

Just after the end of the quarter, RIM crossed the 5 million mark in BlackBerry subscribers.

Symbility parent hopes to raise $5-8 million
April 12, 2006

Automated Benefits, the parent company of Kitchener's Symbility Solutions, is trying to raise $5-8 million through a private placement of units at $0.30. The units consist of a common share and half a warrant to purchase another share for $0.35.

If taken up in full (including a 10% commission to the agents), with all warrants exercised, that would result in 44 million new shares being issued for proceeds of $13.9 million. Automated Benefits already has 63 million shares outstanding -- a huge number for a company with 2005 sales running at a pace a little below $2 million (year-end results haven't been released yet). The company's market value as of Friday's close was $24 million.

The agents for the proposed placement are Canaccord Capital and Northern Securities.

Descartes makes Ottawa company its first acquisition since 2001
April 10, 2006

Descartes has acquired Ottawa's ViaSafe Inc., a provider of secure electronic logistics services that simplify importing and exporting. Financial details have not yet been disclosed.

ViaSafe was founded in 1997 and named one of Canada's hottest startups in 2001 by Profit magazine. It ranked 184th on Branham's 2006 list of the top 250 Canadian technology companies, with sales said to be $6 million in 2005, up from $4.1 million in 2004.

ViaSafe CEO and co-founder Wael Aggan is now an SVP at Descartes. The company has about 50 employees.

It is the first acquisition for Descartes since the end of 2001.

STOCK REPORT: Big returns on promising signs at Virtek, Dalsa
April 2006

Virtek's quarterly results were solid but not earth-shattering, but for investors who had stayed away from the stock waiting for the company to show that it could return to profitability, it was enough to send the shares soaring by 28%. Virtek stock finished April with its highest month-end price in two years, jumping back over a dollar for the first time since 2004.

It was a similar story at Dalsa -- a good, if unspectacular, quarter that boosted investor confidence enough to send the company's shares to their highest level since taking a big tumble last July.

For the month of April:

TurboSonic [OTCBB: TSTA] +39%
Virtek [TSX: VRK] +28%
Dalsa [TSX: DSA] +18%
ARISE [TSXV: APV] +18%
MKS [TSX: MKX] +8%
--S&P TSX VENTURE INDEX +7%
Open Text [TSX: OTC] +6%
Com Dev [TSX: CDV] +3%
ATS [TSX: ATA] +1%
--S&P TSX COMPOSITE INDEX +1%
Sandvine [AIM: SAND] +0%
===============================
Biorem [TSXV: BRM] -2%
RDM [TSX: RC] -4%
Descartes [TSX: DSG] -6%
RIM [TSX: RIM] -13%
Navtech [OTCBB: NAVH] -16%

TurboSonic shares are up 17% this year, and April was the best month ever for the stock, hitting an all-time high of US$1.84 and closing April at US$1.50. Not surprisingly, several company insiders -- including CEO Ed Spink, president Pat Forde, and founder Donald Spink -- have taken this opportunity to sell shares and take some cash out.

Companies with core operations outside the area:

AMIS [Nasdaq: AMIS] +14%
Adobe [Nasdaq: ADBE] +12%
Automated Benefits [TSXV: AUT] +9%
McAfee [NYSE: MFE] +7%
Google [Nasdaq: GOOG] +7%
Oracle [Nasdaq: ORCL] +7%
Ansys [Nasdaq: ANSS] +4%
Sybase [NYSE: SY] +3%
Agfa-Gevaert [Brussels: AGFA] +2%
SBS Technologies [Nasdaq: SBSE] +0%
Blue Coat [Nasdaq: BCSI] +0%
==================================
NCR [NYSE: NCR] -6%
LSI Logic [NYSE: LSI] -8%
Senesco [Amex: SNT] -18%

Miscellaneous Tidbits

• DiskStream unveiled its first product -- a digital video archiving product for broadcasters -- at the NAB 2006 conference in Las Vegas.

• Desire2Learn is working on a $5.5 million project with l'Université de Moncton and the National Research Council, to develop a software suite that will make it more efficient to create e-learning content. The project will receive up to $2.9 million from the Atlantic Innovation Fund over a four-year period.

• TurboSonic raised US$1.15 million through the private placement of 1 million units at US$1.15 a unit. Each unit consisted of a common share and half a warrant to purchase a common share over the next three years at an exercise price of US$1.40.

• Com Dev raised its revenue growth forecast for this year from 10% to 15% -- an increase of just over $6 million.

• Com Dev president Mike Pley is the first recipient of McMaster University's L.W. (Les) Shemilt Distinguished Engineering Alumni Award, which recognizes the achievements of graduates of McMaster's Faculty of Engineering.

• iAnywhere Solutions reported operating income of US$2.1 million on sales of US$39.2 million in the quarter ended March 31. Sales were up 30% from a year ago. iAnywhere also announced that Harris Corporation -- the company that owns Waterloo's Inscriber, among many other things -- will be using iAnywhere technology on more than 500,000 mobile handsets used by door-to-door census takers for the 2010 U.S. census.

• Warner Bros. Studios is the latest film distributor that has agreed to release movies to the Christie/AIX digital distribution and projection system. Christie is manufacturing over 200 digital projectors a month at its facility in Kitchener.

• SlipStream Data won the gold award for product market expansion at the southwest region Ontario Global Traders Awards. The awards are sponsored by the Ontario Ministry of Economic Development and Trade to recognize top exporters. Guelph engineering firm RWDI won gold for service market expansion and Agile Systems placed second in the innovation category to Waterloo's Sport Systems Unlimited, a manufacturer of hockey rink boards. The gold regional award winners now go on to compete for the provincial awards on May 31.

• Joe Vos, the former president of Onlinetel, co-founder of Metafore, and past director of Intellitactics and Software Metrics, is now facing criminal charges of falsifying books and documents, uttering a forged document, and issuing a false prospectus. The charges were laid in January. In 2003, Vos was expelled from the Institute of Chartered Accountants of Ontario and fined $50,000 after a panel heard testimony that he had misappropriated a net $8.56 million from Metafore (see June 2003 digest). Vos chose not to contest those charges and said he would voluntarily give up membership in the Institute.