Two Nanotech Companies to Watch

Do you remember when biological weapons were all the rage? I certainly do. It was about 10 years ago, before Americans feared the "mass existence of WMDs" and became convinced we needed to outgun the Middle East. I remember being legitimately frightened by a presentation one of my 11th grade classmates gave on biological warfare.

For years afterward I would shrug off news reports of anthrax-poisoning because I had seen pictures and data relating that chemical to much more lethal and less treatable ones. Wikipedia lists dozens of chemical agents that have been weaponized or potentially could be. Some are known to cause reactions so extreme and fast-acting that they kill in just hours and have no known cure.

My intent here, believe it or not, is not to scare people into investing in Advance Nanotech (AVNA.OB). Its lone subsidiary, Owlstone Nanotech, engineers and manufactures leading chemical detection equipment. Owlstone's products have only recently been commercialized, and are already setting industry standards with microsized sensors made of insensitive materials.

After 2006 and 2007 revenues were flat around $500,000, Owlstone brought in $3.3M in 2008, the first of three years included in a $3.7M contract with the US Government's Defense Threat Reduction Agency (DTRA). Thus far in 2009, Owlstone has recieved over $1M in orders from UK defense conglomerate Selex Galileo and a new contract from Crowcon Detection Systems.

From an efficiency standpoint, AVNA has restructured in a way that many investors will appreciate. In addition to leaving its 29th floor office on Lexington Avenue in NYC for upstate Montebello, The Company has eliminated all other business interests (AVNA had 20 subsidiaries in 2005) in order to focus on Owlstone. This has reduced the need for administration and other corporate expenses. Furthermore, AVNA majority owners saw enough in Owlstone's CEO, Bret Bader, to appoint him CEO of AVNA late last year.

Given recent cost-cutting and streamlining I see AVNA's poor performance in recent years as a sort of positive, as its market cap is a miniscule $12M. Annual losses in 2007 and 2008 were $4.6M and $4M, respectively, so there's more than hedge-trimming to be done. Costs remained even from 2007 to 2008, giving reason to predict a significant decrease in costs for 2009.

In his November 2008 letter to shareholders, Mr. Bader asserted that Owlstone sensors have significant immediate value in food and chemical processing, among other industrial, environmental and defense applications. He predicted the second half of 2009 will be cash flow positive, and the Selex and Crowcon contracts are a good start. This is a penny stock with very limited cash, but it's pointed in the right direction.

This next company, Competitive Technologies (CTT), is much closer to fruition. From the prospectus:

The Company is a full service technology transfer and licensing provider. It provides technology transfer, selling and licensing services focused on the technology needs of its customers, matching those requirements with commercially viable technology solutions, bridging the gap between market demand and raw innovation.

CTT recently obtained sales and marketing rights from Native Energy, innovator of a non-invasive device for rapid treatment of high-intensity oncologic and neuropathic pain, including pain resistant to morphine and other drugs. With US government agencies alone, CTT has guaranteed contracts of $25M for 2009 and $50M for 2010, both of which are expected to be exceeded. CTT has worldwide distribution rights and is mass-producing the device with Korean partner GEOMC. The device has FDA 510(k) status, CE certification from the Europian Union and has been used on over 3,000 patients in Europe.

Insider buying has been rampant of late and the stock is climbing sharply. CTT has seen almost no revenue since 2006, shrinking its market cap to under $20M. That should grow significantly once sales of this device are reported.

Finally, I suspect that the new administration will be a good change for small defense companies on the cutting edge. Friendships and loyalty with the likes of Halliburton (HAL) have been reduced and the defense budget will do its part in "spreading the wealth."

Disclosure: Long AVNA.OB & CTT

Comments

[Jasper M:]

Great icon. Very fetching.
BUT I am skeptical of the author's suspicion that the new management of the DOD will "spread the wealth" to small companies. Certainly nothing else the Administration is up to seems apt to assist small business.

May 10 08:05 PM

[Danny Furman:]

My point was more that defense funds will be spent more prudently, and that may mean no changes at all (assuming those funds have been well appropriated in recent years).

Also, I failed to include that AVNA has received at least one order from Genzyme.

May 10 10:33 PM

[Danny Furman:]

Great Q1 released today for AVNA.ob. Expenses down 50% with new contracts to hit Q2 and Q3.

May 18 10:06 AM

[vh:]

Do they need to raise money? and is that the reason the stock cant get above 20 cents

May 27 02:18 PM

[Danny Furman:]

A lot of small stocks took a big hit when the DOW dropped sharply today. Panic selling means selling way below market value with stocks like AVNA, unlike more heavily traded companies. I don't care what happens to the price of AVNA til their FY2009 financial report is released. Regardless, it is a risky play (yet a well priced one, even at .20) and should not make up a significant percentage of any portfolio. As far as going above .25 or so short term, more positive operating information would need to be released.

May 27 04:13 PM

[Danny Furman:]

I hope the market makers didn't manipulate anyone out recently:

Owlstone and Agilent Technologies Collaborate to Explore FAIMS/TOF-MS Applications
1:55p ET June 2, 2009 (Market Wire)

ASMS Conference on Mass Spectrometry, June 1, 2009 - Owlstone Nanotech, Inc., a subsidiary of Advance Nanotech, Inc. (OTCBB: AVNA) and Agilent Technologies Inc. (NYSE: A), today announced a phase one agreement to develop Owlstone's field-asymmetric ion mobility spectrometry (FAIMS) filter as a front-end separation module for Agilent's Accurate Mass time-of-flight mass spectrometers (TOF-MS).

The goal is to determine how the systems can work together to enable identification of previously unresolved analytes. The collaboration will also explore how FAIMS can speed up liquid chromatographic separations, saving valuable analysis time.

Financial details were not disclosed.

"The collaboration with Agilent gives us the opportunity to integrate our technology onto highly sensitive mass spectrometers that are ideal for demonstrating the benefit of the unique high-field, fast scanning ability of our FAIMS device," said Bret Bader, Owlstone CEO. "Partnerships with highly skilled organizations like Agilent are a key part of our business strategy. We view this alliance with a recognized industry leader as a further stride in the realization of this strategy and a testament to the quality we strive to achieve at Owlstone; and we are very excited by the potential of these collaborative efforts to bring new analytical capabilities to a world-wide market."

"The fast scanning speed of the Owlstone micro-scale FAIMS device now makes it feasible to acquire ion mobility spectra from LC/MS separations in real time," said John Fjeldsted, Agilent LC/MS Research and Development director. "In particular, our TOF and QTOF systems with Agilent Jet Stream Technology are uniquely suited for coupling to high-speed ion mobility separations by virtue of very high spectral acquisition rates and an excellent analyte desolvation design."

About Agilent Technologies

Agilent Technologies Inc. (NYSE: A) is the world's premier measurement company and a technology leader in communications, electronics, life sciences and chemical analysis. The company's 19,000 employees serve customers in more than 110 countries. Agilent had net revenues of $5.8 billion in fiscal 2008. Information about Agilent is available on the Web at agilent.com.

About Advance Nanotech, Inc. and Owlstone Nanotech, Inc.

Advance Nanotech, Inc. (d/b/a Owlstone) is in the process of restructuring its business and becoming an operating company focused on its majority owned subsidiary Owlstone Nanotech's next generation chemical detection technology. Owlstone Nanotech, Inc. ("Owlstone") is a pioneer in the commercialization of chemical detection products. The Owlstone detector is a revolutionary dime-sized sensor that can be programmed to detect a wide range of chemical agents that may be present in extremely small quantities. Using leading-edge micro- and nano fabrication techniques, Owlstone has created a complete chemical detection sensor that is significantly smaller and can be produced more cost effectively than products using existing technology. There are numerous applications -- across industries from security and defense to industrial process, air quality control and healthcare -- that depend on the rapid, accurate detection and measurement of chemical compounds. Owlstone works with market leaders within these industries to integrate the detector into next generation chemical sensing products and solutions. Owlstone's technology offers a unique combination of benefits, including small size, low manufacturing costs, minimal power consumption, reduced false-positives, and a customizable platform. For more information about Advance Nanotech, Inc. and Owlstone Nanotech, please visit owlstonenanotech.com.

The information contained in this news release, other than historical information, consists of forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Exchange Act of 1934. These statements may involve risks and uncertainties that could cause actual results to differ materially from those described in such statements. Although the Company believes that the expectations reflected in such forward looking statements are reasonable, it can give no assurance that such expectations will prove to have been correct. Important factors, including general economic conditions, spending levels, market acceptance of product lines, the recent economic slowdown affecting technology companies, the future success of scientific studies, ability to successfully develop products, rapid technological change, changes in demand for future products, legislative, regulatory and competitive developments, the Company's ability to secure additional working capital and/or generate sufficient cash flow to support its operations, and other factors could cause actual results to differ materially from the Company's expectations. Advance Nanotech's Annual Report on Form 10-K, recent and forthcoming Quarterly Reports on Form 10-Q, recent Current Reports and other SEC filings discuss some of the important risk factors that may affect Advance Nanotech's business, results of operations and financial condition. The Company undertakes no obligation to revise or update publicly any forward-looking statements for any reason.

Jun 02 02:29 PM

[Giovam:]

Danny:

what will it take for this stock to move? cash position is weak, prospects are high, technology seems to be real. i agree a risky play, but isnt the institutional value of the technology worth more than the 9m market cap? any additional financing will have to come in the way of further dilution if the key stake holders dont want to give up their golden egg, with the 9m market cap, venture capital is tough without selling the company. Whats the strategy?


On Jun 02 02:29 PM Danny Furman wrote:

> I hope the market makers didn't manipulate anyone out recently:<br/>
>
> Owlstone and Agilent Technologies Collaborate to Explore FAIMS/TOF-MS
> Applications
> 1:55p ET June 2, 2009 (Market Wire)
>
> ASMS Conference on Mass Spectrometry, June 1, 2009 - Owlstone Nanotech,
> Inc., a subsidiary of Advance Nanotech, Inc. (OTCBB: seekingalpha.com/symbo...)
> and Agilent Technologies Inc. (NYSE: seekingalpha.com/symbol/a),
> today announced a phase one agreement to develop Owlstone's field-asymmetric
> ion mobility spectrometry (seekingalpha.com/symbo...)
> filter as a front-end separation module for Agilent's Accurate Mass
> time-of-flight mass spectrometers (TOF-MS).
>
> The goal is to determine how the systems can work together to enable
> identification of previously unresolved analytes. The collaboration
> will also explore how FAIMS can speed up liquid chromatographic separations,
> saving valuable analysis time.
>
> Financial details were not disclosed.
>
> "The collaboration with Agilent gives us the opportunity to integrate
> our technology onto highly sensitive mass spectrometers that are
> ideal for demonstrating the benefit of the unique high-field, fast
> scanning ability of our FAIMS device," said Bret Bader, Owlstone
> CEO. "Partnerships with highly skilled organizations like Agilent
> are a key part of our business strategy. We view this alliance with
> a recognized industry leader as a further stride in the realization
> of this strategy and a testament to the quality we strive to achieve
> at Owlstone; and we are very excited by the potential of these collaborative
> efforts to bring new analytical capabilities to a world-wide market."
>
>
> "The fast scanning speed of the Owlstone micro-scale FAIMS device
> now makes it feasible to acquire ion mobility spectra from LC/MS
> separations in real time," said John Fjeldsted, Agilent LC/MS Research
> and Development director. "In particular, our TOF and QTOF systems
> with Agilent Jet Stream Technology are uniquely suited for coupling
> to high-speed ion mobility separations by virtue of very high spectral
> acquisition rates and an excellent analyte desolvation design."<br/>
>
> About Agilent Technologies
>
> Agilent Technologies Inc. (NYSE: seekingalpha.com/symbol/a)
> is the world's premier measurement company and a technology leader
> in communications, electronics, life sciences and chemical analysis.
> The company's 19,000 employees serve customers in more than 110 countries.
> Agilent had net revenues of $5.8 billion in fiscal 2008. Information
> about Agilent is available on the Web at agilent.com.
>
> About Advance Nanotech, Inc. and Owlstone Nanotech, Inc.
>
> Advance Nanotech, Inc. (d/b/a Owlstone) is in the process of restructuring
> its business and becoming an operating company focused on its majority
> owned subsidiary Owlstone Nanotech's next generation chemical detection
> technology. Owlstone Nanotech, Inc. ("Owlstone") is a pioneer in
> the commercialization of chemical detection products. The Owlstone
> detector is a revolutionary dime-sized sensor that can be programmed
> to detect a wide range of chemical agents that may be present in
> extremely small quantities. Using leading-edge micro- and nano fabrication
> techniques, Owlstone has created a complete chemical detection sensor
> that is significantly smaller and can be produced more cost effectively
> than products using existing technology. There are numerous applications
> -- across industries from security and defense to industrial process,
> air quality control and healthcare -- that depend on the rapid, accurate
> detection and measurement of chemical compounds. Owlstone works with
> market leaders within these industries to integrate the detector
> into next generation chemical sensing products and solutions. Owlstone's
> technology offers a unique combination of benefits, including small
> size, low manufacturing costs, minimal power consumption, reduced
> false-positives, and a customizable platform. For more information
> about Advance Nanotech, Inc. and Owlstone Nanotech, please visit
> owlstonenanotech.com.
>
> The information contained in this news release, other than historical
> information, consists of forward-looking statements within the meaning
> of Section 27A of the Securities Act of 1933 and Section 21E of the
> Exchange Act of 1934. These statements may involve risks and uncertainties
> that could cause actual results to differ materially from those described
> in such statements. Although the Company believes that the expectations
> reflected in such forward looking statements are reasonable, it can
> give no assurance that such expectations will prove to have been
> correct. Important factors, including general economic conditions,
> spending levels, market acceptance of product lines, the recent economic
> slowdown affecting technology companies, the future success of scientific
> studies, ability to successfully develop products, rapid technological
> change, changes in demand for future products, legislative, regulatory
> and competitive developments, the Company's ability to secure additional
> working capital and/or generate sufficient cash flow to support its
> operations, and other factors could cause actual results to differ
> materially from the Company's expectations. Advance Nanotech's Annual
> Report on Form 10-K, recent and forthcoming Quarterly Reports on
> Form 10-Q, recent Current Reports and other SEC filings discuss some
> of the important risk factors that may affect Advance Nanotech's
> business, results of operations and financial condition. The Company
> undertakes no obligation to revise or update publicly any forward-looking
> statements for any reason.

Jun 09 11:25 AM

[Danny Furman:]

This may be a 2 year holding, but as you said the technology is very real. My belief is that an individual investor or small firm is currently unloading a large position. The Company has no reason to constantly sell shares for .15 when more shares were being sold at .19. I sincerely believe this will be a profitable company in the 4th quarter and possibly the 3rd. Amazing partnerships have been announced without contract disclosure, which is a good thing in my opinion. This is a FY09 play for me and I wouldn't sell at 30 cents if it did run up short term. It's a matter of confidence and I don't see a real possibility for this to be a $9M company for long. I have a few positions like AVNA and I don't even consider them when I analyze my portfolio short term.
Good Luck.

Jun 10 01:29 PM

[TATyszka:]

You say, "CTT has guaranteed contracts of $25M for 2009 and $50M for 2010." That is simply not so.

The exact wording is that they have , "signed distribution agreements for the device [with] retail sales value of over $25 million for 2009 and about $50 million for 2010."

That is a far cry from the amount the company will actually see. From the CEO: "As the pain management medical device attains mature market levels, we believe it will reach approximately $200 million per year in distributor sales to hospitals and clinics. At that time, our revenue and profits from the device will dramatically exceed those produced by any other technology in CTT's 40-year history, resulting in approximately $20 million per year to CTT."

Note, he says, when the market reaches "maturity," the company will realize 20 million a year. At similar profit margins (and it would be a stretch to expect margins as high) you could expect 2.5 million to CTT at most, for 2009. Even if the company slashes their Cost of Revenues and their SGA costs by half, they still have 3.4 million in operating expenses or a .9 million dollar net loss.

Not trying to pooh-pooh this as a good investment idea; I just think you should present the facts with a little more proper perspective.

Jun 30 11:14 PM