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By a Stroke, Callaway Golf Joins Exclusive $1 Billion in Sales Club

By virtue of its rise in revenues to above $1 billion for 2006, Callaway Golf Co. joins a fairly exclusive club, becoming the eighth local firm to pass that financial threshold.

Last year, its members were Sempra Energy, Science Applications International Corp., Qualcomm Inc., Jack in the Box Inc., Petco Animal Supplies Inc., K2 Inc., Invitrogen Corp. and Callaway.

But in October, Petco Animal Supplies was brought out by two private equity firms, the second time that’s happened, so it’s no longer public.

But the Petco departure was made up by the gain of SAIC, which went public last year.

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A ninth local company is likely to join the club when Leap Wireless International, the flat-rate cell phone carrier based here, releases its 2006 annual 10K report next month. Through the end of September, Leap had $700 million in revenue, so it should break through the $1 billion mark when year-end results are announced.

In 2000, San Diego had six public companies with more than $1 billion in revenues, but half of those are no longer members of the club. Gateway acquired eMachines and moved the company to Irvine. Titan Corp. was acquired by L3 Communications, based in New York, and while Iomega Corp. is still based here, its revenues have plummeted from about $1 billion to below $300 million last year.

Callaway’s entrance to the billion-dollar club was rather modest.

Last year’s sales grew a mere 0.2 percent from 2005’s $998 million. Callaway’s financial results won’t be released until Feb. 8.

On Jan. 19, the company said annual earnings should come in by a range of 33 to 35 cents per share for the year, beating Wall Street estimates.

That caused its shares, traded under ELY on the New York Exchange, to rise 12 percent Jan. 19, and an additional 1.5 percent Jan. 22 to $15.95.

It’s not quite there just now, but AMN Healthcare, a nurse staffing company, forecast breaking past $1 billion for the year in its third quarter. At the end of September, AMN had $800 million in revenue, so that target looked within reach.

Cubic Corp. is another local firm that is close to reaching the billion-dollar mark. For its last fiscal year that ended Sept. 30, it logged more than $821 million in revenue.

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Changes To Options Cause Increased Loss At ATC:

The good news out of American Technology Corp. is the company’s auditors uncovered no evidence of back dating its stock options during an eight-year period. But it did find some mistakes, which prompted a restatement of financial results for fiscal years 2002 to 2005.

As a result of revised measurement dates and fair market formulas, the company recorded additional non-cash charges of $1.2 million for the fiscal years 1998 to 2005.

ATC, which develops and licenses sound technology for military and commercial use, now reports its net losses from the 2006-2002 fiscal years as $7.7 million; $9.3 million; $6.4 million; $8.8 million; and $8.2 million.

Since its founding in 1981, ATC has never made a profit.

Because of the delay in its stock option review, ATC was unable to meet its deadline to file results for its last fiscal year, which ended Sept. 30.

While that news triggered a letter from the Nasdaq exchange that it faced delisting, the company did file its annual 10K results Jan. 8, which could bring it back into compliance.

Chief Executive Officer Tom Brown also said ATC was off to a “promising start” for its current fiscal year, with revenues of $3.8 million in the first quarter that ended Dec. 31.

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Chairman Lends Firm $2M:

It’s not every day you see a director of a public company reaching into his own pocket to lend his firm money, but that’s what John Hagenbuch did recently.

Hagenbuch, chairman of MicroIslet Inc., a local biotech company developing drugs for people with diabetes, loaned his startup $2 million in cash in a one-year unsecured subordinated promissory note with interest at 8.25 percent.

Besides repayment of his cash, Hagenbuch receives a 10-year warrant allowing him to buy up to 500,000 shares of MicroIslet at an exercise price of $1 per share.

Hagenbuch, who now owns 8.5 percent of the stock, said the loan would help the company address short term cash needs, as well as providing tangible support for CEO Jim Gavin.

Since the news of the loan, shares of MicroIslet, traded on the American Stock Exchange under MII, rose from 72 cents to 80 cents.

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Patriotic Revenues:

Patriot Scientific Corp., a Carlsbad company that collects licensing rights for a shared portfolio of technologies, signed up two more licensing deals in December with Lexmark International Inc. and Schneider Electric.

It also reported net income of $4.1 million for the first six months of its fiscal year that ended Nov. 30. That compared with $7.4 million in net profits for the like period of 2005.

Phoenix Digital, the joint venture entity owned equally by Patriot and the TPL Group of Cupertino, received aggregate proceeds of $32.7 million from technology licensing agreements signed with third parties.

Patriot set up its partnership with TPL after it settled long-standing litigation regarding the ownership of the patent portfolio.

In the past year, Patriot said it signed licensing agreements with 10 companies, including some of the largest electronics manufacturers in the world.

Patriot CEO David Pohl said the list of prospective licensees numbers more than 400, so the company’s revenue growth remains positive.

As of Jan. 22, Patriot stock traded on the Over the Counter Bulletin Board was at 48 cents. Its 52-week range was between 9 cents and $2.25.

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E.Digital Signs Stock Agreement:

E.Digital Corp., a provider of secure video on demand products, said it signed an $8.5 million stock purchase agreement with Fusion Capital Fund II LLC, a Chicago-based institutional investor.

The company sold $250,000 in common stock at a purchase price of 12 cents per share, and agreed to sell another $250,000 at the same share price later.

It also may sell an additional $8 million in common stock to Fusion from time to time during a 25-month period.

The company said it plans to use the proceeds to expand its eVU mobile entertainment system business, accelerate licensing efforts of its flash memory-related patent portfolio, and for general working capital.

Traded under EDIG.OB, shares closed Jan. 23 at 17 cents, and have ranged from 7 to 22 cents in the past 52 weeks.


Send any news of San Diego-based public companies to Mike Allen via e-mail at

mallen@sdbj.com

. He can be reached at (858) 277-6359.

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