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Hello Readers,

Since the last Newsletter, we closed ten positions; six for gains and four for losses.

VERMILLION, INC. (6/20/12). Closed position 5/29/13 at $3.90 for a 66% GAIN.

BALLARD POWER SYSTEMS (3/20/12). Closed position 5/29/13 at $2.35 for a 57% GAIN.

NANOSPHERE (4/20/13). Closed position 5/23/13 at $3.78 for a 64% GAIN.

JAMBA, INC. (3/20/11). Closed position 5/23/13 at $3.15 for a 52% GAIN.

REAL GOODS SOLAR (1/20/11). Closed position 5/20/13 at $6.78 for a 160% GAIN.

PEREGRINE PHARMACEUTICALS (3/5/13). Closed position 5/20/13 at $2.02 for a 54% GAIN.

BIOSTAR PHARMA (4/20/11). Closed position 5/20/13 at 75 cents for an 85% LOSS.

(price reflects reverse stock split)

REXAHN PHARMA (7/20/10). Closed position 5/23/13 at 43 cents for a 69% LOSS.

CYTRX (1/5/10). Closed position 5/29/13 at $2.40 for a 68% LOSS.

(price reflects reverse stock split)

GLEACHER & CO. (6/5/11). Closed position 5/30/13 at 70 cents for a 68% LOSS.

About once every two or three years, the momentum players seem to turn their attention to solar stocks and that is probably what caused Real Goods Solar to rocket to nose-bleed levels, and we thank them so very much. Our second dance with Peregrine Pharmaceuticals panned out when the company reached agreement with the FDA on its lung cancer trial design. It was also our second time around with Nanosphereas the stock got a nice lift on promising product news. And, without sounding redundant, it was our second time with Vermillion as the stock soared on no apparent news, which is okay! Over the last several weeks, there has been a surge in alternative energy stocks and, thankfully, Ballard Power Systems seems to have been caught in the updraft. After a long steady uphill slog, Jamba, Inc. finally hit our 50%-plus target. And, we closed Biostar PharmaRexahn Pharma, and CytRx for some nasty losses. Ditto with Gleacher & Co. who just announced they are planning a one for twenty reverse split.

These are the most positions we have closed in any two-week period in perhaps over a year. Helping us is the tide from the big caps and mid-caps, which has started to lift small stocks, finally. How much longer does the tsunami continue? As we all know, that is up to the world’s central bankers.

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 very significant.

InspireMD (NSPR)(5/20/13). MGuard embolic protection stent shows lower mortality rate in STEMI patients at six months compared to control group. Receives reimbursement approval for MGuard from UNIMED, Brazil’s largest private insurer.

Antaras Pharma (ATRS)(5/20/13). To present at the Jeffries healthcare conference on June 3, the day we post this Newsletter.

Synacor (SYNC)(4/20/13). To present at Needham’s media conference on June 4. Expands into Boston area with new engineering operation.

Joe’s Jeans (JOEZ)(3/20/13). Downgraded from a “buy” to a “hold” by TheStreet.com and coverage is initiated by B. Riley & Co.

Oncothyreon (ONTY)(3/20/13). To present at the Jefferies healthcare conference on June 5. Stock got rocked a little after new cancer drug data fails to improve survival rate. Collaborates with Array to develop and commercialize anti-HER2 compound ARRY-380. Announces $10 million registered direct offering to BVF Partners.

Echelon (ELON)(3/5/13). Mitsubishi Electric to enhance global smart meter business through collaboration with Echelon. Unveils industry’s first hybrid RF and power line street lighting control solution.

AlphaTec (ATEC)(2/20/13). To present at the Jefferies healthcare confab on June 5. Will host Technology Day on June 6 in NYC.

Ventrus Biosciences (VTUS)(2/20/13). More “well-meaning” lawyers file shareholder suits, which have not yet affected the stock.

Apricus Biosciences (APRI)(2/5/13). Prices $17.5 million secondary offering, which could put pressure on stock on it begins trading.

EnteroMedics (ETRM)(1/20/13). Completes VBLOC therapy pre-PMA meeting with the FDA. Receives NASDAQ delisting notice, which doesn’t bother us, right now, since the company has some leeway to iron out the problem.

Horizon Pharma (HZNP)(12/20/12). Receives fifth U.S. patent allowance for DUEXIS.

TeleCommunication Systems (TSYS)(11/5/12). About releases on various products and trade shows.

Response Genetics (RGDX)(10/20/12). To present at the clinical oncology annual meeting on June 4. Gets contract with Blue Shield of California.

Anthera Pharmaceuticals (ANTH)(10/5/12). To present at the Jefferies healthcare confab on June 6.

Zynga (ZNGA)(10/5/12). The usual few dozen stories and releases.

ImmunoCellular Therapeutics (IMUC)(9/20/12). Receives key patent covering ICT-107 cancer vaccine target.

pSivida (PSDV)(8/5/12). Signs tech evaluation agreement with leading global pharmaceutical company.

Overland Storage (OVRL)(7/20/12). Confirms it has received a proposal from Cyrus Capital for a potential combination between Overland and Tandberg Data Sarl. ITC issues notice of decision in company’s patent suit against BDT; suit to proceed in U.S. District Court.

Avanir Pharmaceuticals (AVNR)(6/5/12). To present at the Jefferies healthcare conference on June 5.

Capstone Turbine (CPST)(5/20/12). Receives major order for global real estate development and investment firm. Receives order for Hybrid UPS for green data center owned by nation’s largest natural gas distribution facility.

Bacterin (BONE)(5/12/20). Receives compliance notice from NYSE MKT as stock weakens even more. We have placed this on the “Endangered List”.

Axcelis Technologies (ACLS)(4/5/12). Ships next generation Purion M implanter to major Asian semiconductor manufacturer.

Mattson Technology (MTSN)(4/5/12). Needham upgrades the stock to a “buy”.

Geron (GERN)(2/5/12). To present at the Jefferies healthcare confab on June 6.

Anadigics (ANAD)(11/20/11). Introduces new family of 802.11 ac Wi-Fi power amplifiers. Industry’s first 802.11 ac 4×4 reference design specifies Anadigics’ Wi-Fi___33 FEICs. Samsung selects ANAD’s Wi-Fi___33 and cellular solutions for Galaxy S4. Announces GaN Line Amplifier for 1.2 GHz CATV systems.

ECOtality (ECTY)(11/5/11). Unveils the Blink HQ family of Home EV chargers.

On Track Innovations (OTIV)(6/20/11). Receives order for 30,000 NFC and contactless payment readers. Names new CFO. Recent numbers could have been better; balance sheet still looks pretty good.

NeoStem (NBS)(5/20/11). Announces geographic expansion of Intellectual Property coverage of cardiovascular asset AMR-001. Announces presentations at 2nd Baltic stem cell meeting and session to feature VSEL technology.

GSE Systems (GVP)(4/20/11). Agrees to develop a joint venture with Electrobalt Holding.

Pixelworks (PXLW)(11/20/10). To demonstrate enhanced mobility for projectors at InfoComm. Introduces VueMagic mobile presenter for Sony projectors.

NovaBay Pharmaceuticals (NBY)(4/20/10). Enters into a collaboration and license agreement with Virbac for animal health.

Qualstar (QBAK)(10/20/09). Adds three authorized resellers to expand vertical market focus. Comments on BKF Capital’s latest attempt to obtain control of company.

Our picks for this Newsletter are an agricultural biotech and an industrial goods maker, both NASDAQ-listed.

CERES, INC. (NASDAQ: CERE) – $2.16. Twelve-month hi-low has been $11.84 – $1.92. Based in Thousand Oaks, CA, with about 85 employees, this agricultural biotech has 24.8 million shares outstanding, $47.55 million in total current assets, $52.9 million in total assets, little debt, and $4.89 million in total liabilities. Institutional ownership is around 72%. Two analysts rate the stock a “strong buy”, three as a “buy”, and one has it on “hold”. www.ceres.net

Over a year ago, Ceres, Inc. did an IPO, for around $15 a share, and like too many initial offerings, the company did not live up to over-hyped expectations from the Street. And, so, the stock tanked. But, the company still is plodding along with its nifty technology and a big chunk of money in its war chest.

Founded in 1996, and public for over sixteen months, Ceres is developing and selling energy crops to produce renewable biomass feed stocks in North America. In sum, this is a biofuels play, and despite many of us hating the idea of biofuels, they are not going away anytime soon. The company’s energy crops include sweet sorghum that complements sugar cane production; high biomass sorghum, suited for generating renewable electric power and creating cellulosic biofuels; switchgrass, a perennial grass that tolerates a range of environmental conditions and offers high biomass yield potential; mscanthus x giganteus, a tall perennial grass used as an energy crop on a small scale; and row crops. Its energy crops would also be used for producing second-generation biofuels and bio-based chemicals, including cellulosic ethanol, butanol, jet fuel, diesel-like molecules, and gasoline-like molecules. Ceres sells its seed varieties and traits under the Blade trade name to ethanol mills, utilities, independent power producers, cellulosic biofuel companies, individual growers, and grower cooperatives.

Now, here is what is interesting. Ceres has a proprietary collection of more than 100,000 genes from numerous plant species. It also has exclusive rights to over 110 issued U.S. patents and 200 U.S. and foreign patent applications pending. These two facts are probably part of the reason that half-dozen analysts are following the company.

Like many R&D biotechs, Ceres has still has lousy numbers. For example, during the quarter ending 2/28/13, revenue was just over $1 million with $9 million in losses.

Many truck fleets have been forced into biofuels and even a good part of the U.S. Navy’s fleet is running on biofuels. So, this is not a fad. The company has a nice patent portfolio, a hefty wad of cash in reserve, and we like the number of analysts behind the stock.

Our 24-month target for the stock is $3.50 to $4.00.

For more information, contact CERE’s Gary Koppenjan at 805-375-7801; ir@ceres.net

FLOW INTERNATIONAL CORPORATION (NASDAQ: FLOW) – $3.95. Twelve-month hi-low has been $4.06 – $2.70. Based in Kent, WA, with about 630 employees, this industrial goods maker has 48.4 million shares outstanding, $123.71 million in total current assets, $152.31 million in total assets, little long-term debt, and $53.38 million in total liabilities. Institutional ownership is around 75%. Two analysts rate the stock a “strong buy” and two as a “buy”. www.flowwaterjet.com

The first thing we will tell you about Flow International Corporation is that it has absolutely no sex appeal, if a stock has any all at. What really stood out about the company was a recent article in Barron’s where the writer has it pegged as a potential take over and his arguments make some sense. Also, it doesn’t hurt that Flow has been making money for the last several years on good revenue growth, should the take-over thing not happen, which is always a possibility.

Founded in 1974, and public since 1984, Flow provides water jet cutting and surface preparing solutions. The company offers ultrahigh pressure water systems, automation and articulation systems, composite machining solutions, shape-cutting systems, and ultrahigh pressure surface preparations systems. Flow’s water jet cutting and surface preparation systems provide total system solutions for various materials, including metal, stone, tile, composites, food, paper, rubber, and structural foam for job shops and industrial companies. The company’s ultrahigh pressure surface preparation and industrial cleaning systems are used to remove coatings. In addition, Flow offers consumable parts and services; and sells various tools and accessories, which incorporate its technology. The company serves customers worldwide.

According to the Barron’s story, one of the major players in Flow is an outfit called Otter Creek Management, which is urging the board to consider strategic alternatives, including a sale of the company. Over the last dozen years, Otter Creek has owned positions of varying sizes in Flow, and has been considered a patient investor. Now, Otter Creek is pushing for a sale of the company since it believes that Flow could save some money by doing so. The article says that a logical buyer would be Mitsubishi, which has a division with a competing product that many believe is inferior, and that a good takeover price should be $6.00 to $8.00 a share, based on Flow’s annual sales.

For the FY ending 4/29/12, revenue was $253.76 million with $9.44 million in net income. During the first nine months of the current FY, revenue has been $200.93 million with $6.94 million in net income.

If this did not seem like a solid company, we would not consider taking a flyer on a takeover possibility. But, as we said, should this never materialize, Flow appears to have a nice niche going for it.

Our 24-month target for the stock is $5.75 to $6.50.

For more information, call FLOW’s Geoffrey Buscher at 253-813-3286; investors@flowcorp.com

Look for the June 20, 2013 Newsletter to be posted on 6/17 or 6/18.

Thank you,