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Hello Readers,

If you want to know why the markets have been stagnant for the last few months, go back to Fall, 2008 and to Spring, 2009. During the earlier season, we had TARP, and during the latter we had the “economic stimulus” package, and, in the midst of all that, we had the Fed doing damage to the underlying financial structure. And now, we have more promises of a “financial reform” bill. This all adds up to a very twisted and contorted market that is unable to price the true value of anything, and small investors are beginning to sense danger. In sum, the psychology has started to shift from, “Gee, these guys sure know what they’re doing” to “Wait a sec, isn’t this the same gang who got us into the mess in the first place?”. Needless to say, the market’s recent lethargy has kept our Current Portfolio still a little beaten up.

Here are the headlines since the last Newsletter about companies in the Current Portfolio; dates in parentheses are when we first recommended them. We are not giving updates about companies on the “Endangered List” unless we feel the news to be highly significant. NOTE: There are not many updates in this issue because of the time of year; expect this slow news cycle to continue up until mid-July, at which time a new earnings season starts.

AEterna Zentaris (AEZS)(6/20/10). Receives positive scientific advice from the European Medicines Agency for its Phase 3 trial with Perifosine in colorectal cancer. Collaborates with Almac to develop therapy and companion diagnostic in cancer. Closes $12 million secondary offering.

DUSA Pharmaceuticals (DUSA)(6/5/10). Reports U.S. Patent Office upholds key photodynamic therapy patent.

Wildan Group (WLDN)(5/20/10). Supports Gulf Coast hurrican emergency response.

Adolor (ADLR)(5/5/10). Stock price drops after company reports that its pain drugs failed in midstage trial. This one is “wait and see”, but ADLR’s balance sheet still looks healthy.

Cerus (CERS)(3/20/10). Announced results of 22 abstracts presenting experiences with the INTERCEPT Blood System for platelets, plasma and red blood cells.

ZAGG, Inc (ZAGG)(2/20/10). To introduce invisibleSHIELD Dry nationwide exclusively through AT&T. To join Russell Microcap Index.

NIVS IntelliMedia (NIV)(1/20/10). Expands presence in China market. Brokerage firm Rodman & Renshaw initiates coverage on company.

OXiGENE (OXGN)(11/20/09). Will present data from FACT study to the International Thyroid Congress on September 12. Presents encouraging preclinical data on ZYBRESTAT ophthalmology program. Completes enrollment of ZYBRESTAT Phase 2 trial in non-small cell lung cancer. We have put this on the “Endangered List”.

Solta Medical (SLTM)(10/5/09). Announces Thermage CPT and Fraxel re:store dual systems receive Health Canada approval.

BioSante Pharmaceuticals (BPAX)(9/20/09). Announces positive clinical results in Pill-Plus oral contraceptive study. Added to Russell 3000 Index. Closes $15 million secondary offering to fund LibiGel for female sexual dysfunction. Reports positive LibiGel safety data in Phase III clinical program and says FDA advisory committee recommendation against Flibanserin has no impact on product.

Investors Capital (ICH)(9/20/09). Posts net profit for FY2010; balance sheet still looks good.

Anadys Pharmaceuticals (ANDS)(8/20/09). Roth Capital downgrades the stock to a “hold”.

Performance Technologies (PTIX)(7/20/09). Viaero Wireless selects company’s SEGway IP signaling solution.

Durect Corp (DRRX)(4/20/09). Says EU trial of pain drug meets one of two study goals.

Ligand Pharmaceuticals (LGND)(2/20/09). Brokerage firm C.K. Cooper gives the stock a “buy”.

Akeena Solar (AKNS)(10/20/08). Another law firm says it is investigating company “for investors”. We are placing this on the “Endangered List”.

Identive Group (INVE)(10/5/08). To supply readers for German electonic ID program.

U.S. Geothermal (HTM)(8/5/08). Acquires mineral ownership interests at Neal Hot Springs Project.

Hollywood Media (HOLL)(1/5/08). Says continues rapid expansion; signs 200th theater chain.

Linktone (LTON)(11/5/07). Obtains exclusive wireless distribution rights for 2010 FIFA World Cup theme song.

Sunesis Pharma (SNSS)(11/5/07). Closes $28.5 million final tranche of 2009 private placement. This one is on the “Endangered List”.

LRAD Corp (LRAD)(10/5/07). Awarded $700,000-plus order from the U.S. Navy. Gets $463,000 LRAD 1000X order from U.S. Navy under Block 0 of the Shipboard Protection System. Receives $1.9 million LRAD systems and services order from U.S. Navy.

Inventure Foods (SNAK)(3/5/06). Introduces healthier snack options in its Olive Oil Kettle Chips.

8×8 (EGHT)(1/20/06). Set to join Russell Microcap Index.

Our picks for this Newsletter are a medical instruments maker and a security company, both NASDAQ-listed.

CARDICA, INC. (NASDAQ: CRDC) – $1.63. Twelve-month hi-low has been $3.19 – $1.63. Based in Redwood City, CA, with about 35 employees, this medical instruments maker has 24 million shares outstanding, $11.67 million in total current assets, $13.34 million in total assets, little debt, and $4.02 million in total liabilities. Institutional ownership is around 28%. Three analysts have the stock as a “hold”.

As we look a little into the future, we all see a deluge of spending in health care, and companies like Cardica, Inc. could see better days ahead. The company has a pretty decent balance sheet and some promising technologies in development.

Founded in 1997, and publicly-traded for just over four years, Cardica designs and makes medical devices for cardiac and other surgical procedures based on its proprietary stapling and cutting technology. This technology is designed to minimize operating time and to enable minimally-invasive and robot-assisted surgeries. The company manufactures its automated anastomosis systems, the C-Port Distal Anastomosis Systems and PAS-Port Proximal Anastomosis System, for coronary artery bypass graft (CABG) surgery and has shipped 25,000 units around the world. Cardica believes that by replacing hand-sewn sutures with automated systems, they will allow surgeons to perform consistent, reliable anastomoses with even the smallest of vessels.

In addition, Cardica is developing the Microcutter, a true multi-fire endoscopic stapling device designed to be used in a variety of procedures, including bariatric, thoracic and general surgery. Current stapling technology requires the user to remove the stapling tool from the surgical site after each deployment to exchanges cartridges. The Microcutter will allow surgeons to perform successive deployments without the need to remove and reload the stapling device.

For the FY ending 6/30/09, revenue was $9.87 million with $17.2 million in net losses. During the first nine months of the current FY, ending 3/31/10, revenue was $2.79 million with $7.87 million in losses.

Yes, the company has stumbled pretty badly during the last year, or so, but, during the last quarter, product shipments got a nice bounce, and this could be a turnaround signal. Also, Cardica feels that it is on track to launch to Microcutter early in 2011, subject to FDA clearance.

Our 24-month target for the stock is $3.00 to $3.25.

For more information, contact CRDC’s Robert Newell at 650-331-7133;

NAPCO SECURITY TECHNOLOGIES, INC. (NASDAQ: NSSC) – $1.82. Twelve-month hi-low has been $3.02 – $1.11. Located in Amityville, NY, with about 770 employees, this security company has 19.1 million shares outstanding, $41.65 million in total current assets, $74.49 million in total assets, little long-term debt, and $38.39 million in total liabilities. Institutional ownership is around 29%. One analyst rates the stock a “strong buy”.

Not all of our picks can be termed “sexy” and NAPCO Security Technologies, Inc. certainly is not, but it offers products that are in wide demand. The company, along with the rest of the world, got hit in 2009, and may be starting to see some better days.

Founded in 1969, and public for nearly thirty years, NAPCO does not have a long narrative. Simply put, it makes and sells security products, including intrusion and fire alarms, building access control systems, and electronic locking devices worldwide; to date in nearly 45 countries. It offers access control systems that comprise identification readers, control panel, personal-based computer, and electronically activated door-locking devices; and alarm systems, which consist of automatic communicators, control panels, combination control panels/digital communicators and digital keypad systems, door security devices, fire alarm control panels, and area detectors. NAPCO products are used in commercial, residential, institutional, industrial, and government applications. It also sells peripheral and related equipment made by other companies.

For the FY ending 6/30/09, revenue was $69.56 million with $13.32 million in losses. During the first nine months of the current FY, revenue was $47.12 million with $4.59 million in losses.

The company saw a nice uptick in sales during the last quarter, causing some optimism about the balance of the year.

Our 24-month target for the stock is $3.25 to $3.50.

For more information, contact NSSC at 631-842-9400.

Look for the July 20, 2010 Newsletter to be posted on 7/16 or 7/19.

Thank you,

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