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Hello Readers,

Thanks to the recent comments from the Fed chairman, it appears the markets have shrugged off their recent fears about tapering. Also helping is the fact that July has traditionally been one of the market’s better months. Even the smaller stocks at our end of the financial spectrum have been getting a nice lift. And no, we did not close any positions since the last Newsletter, but we are not overly concerned, since these things seem to come in spurts; such as the sixteen positions we closed during May and June.

As long as the Fed and the world’s other central banks keep pumping liquidity into the financial system the markets should keep making us dizzy. Our fear is how big the bubble gets before it goes boom and splatters, again, as it did in 2008. In the meantime, enjoy the ride.

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.

Baxano Surgical (BAXS)(7/5/13). Company settles Medicare fraud suit, which doesn’t seem to affect stock price much.

Mela Sciences (MELA)(5/5/13). Hosts a business review update conference.

Cytori Therapeutics (CYTX)(5/5/13). Names new board chairman.

iPASS, Inc. (IPAS)(4/5/13). To report 2nd QT results on August 7.

XOMA Corp. (XOMA)(4/5/13). Transfers Perindopril franchise rights to Symplmed.

Joe’s Jeans (JOEZ)(3/20/13). Releases some pretty nice looking quarterly numbers.

Echelon (ELON)(3/5/13). Latest version of NES software to propel E.ON Sweden’s grid modernization program.

Ventrus Biosciences (VTUS)(2/20/13). More shareholder lawsuits filed.

Gevo, Inc. (GEVO)(1/20/13). Sets earnings call for August 6.

Codexis (CDXS)(1/5/13). Forms collaboration with Purolite to develop and market immobilized enzymes for the pharmaceutical market.

TeleCommunication Systems (TSYS)(11/5/12). Named awardee on DOD contract with estimated ceiling of $48 million over three years.

Response Genetics (RGDX)(10/20/12). Gets contract with Blue Cross and Blue Shield of Illinois.

Anthera Pharmaceuticals (ANTH)(10/5/12). Sadly, we need to place this one on the “Endangered List” as the company does a 1 for 8 reverse stock splits. These seldom work for current shareholders and are usually red meat for short sellers.

Zynga, Inc. (ZNGA)(10/5/12). The usual upteen stories and releases, most notable, of course, is the company hired former Xbox chief as CEO. Zacks upgrades stock to “strong buy”.

AXTI, Inc. (AXTI)(9/5/12). Slates 2nd QT earnings call for July 31.

SemiLEDS (LEDS)(8/20/12). Quarterly numbers not good; balance sheet still looks strong.

pSivida (PSDV)(8/5/12). Announces interim data from investigator-sponsored Uveitis study. Initiates Phase III clinical trial in posterior Uveitis.

Overland Storage (OVRL)(7/20/12). Receives NASDAQ delisting notice over rules, which, at this time, we are not too worried about.

Aviat Networks (AVNW)(7/20/12). Awarded $13 million microwave backhaul contract with State of Oregon.

Athersys (ATHX)(7/5/12). Says cell therapy benefits organ transplant, according to study.

Capstone Turbine (CPST)(5/20/12). Secures orders for 4.6MW from two leading U.S. natural gas producers in the Northeast.

Axcelis Technologies (ACLS)(4/5/12). Closes $15 million three-year term loan with Northern Bank & Trust.

Mattson Technology (MTSN)(4/5/12). Sets earnings call for July 24.

Anadigics (ANAD)(11/20/11). To power Huawei smartphone and its amplifiers to power Samsung.

Synthesis Energy Systems (SYMX)(8/20/11). Announces sales of methanol at commercial scale at its Yima joint venture plant.

Neostem (NBS)(5/20/11). And sadly again, we place another one on the “Endangered Lists” as it does a one for 10 reverse stock split. Usually, not a great idea.

Inovio Pharma (INO)(10/20/10). Says its CELLECTRA electroporation delivery technology powers durable, best-in-class T-cell responses from HIV vaccine in human study.

Novavax (NVAX)(4/5/10). Initiates first Phase 1 clinical trial of its A(H7N9) influenza vaccine candidate. Announces top-line results from Phase 1 trial of RSV vaccine candidate.

Qualstar (QBAK)(10/20/09). Releases results of 2013 shareholders meeting. Names interim CEO.

Our picks for this Newsletter are another one of those small biotechs that trades on the NASDAQ and a social media company that trades on the NYSE MKT, nee AMEX.

DISCOVERY LABORATORIES, INC. (NASDAQ: DSCO) – $1.70. Twelve-month hi-low has been $3.51 – $1.50. Based in Warrington, PA, with about 110 employees, this biotech has 53.3 million shares outstanding, $26.37 million in total current assets, $29.16 million in total assets, and $19.71 million in total liabilities, of which $6.21 million is long-term debt. Institutional ownership is around 39%. One analyst rates the stock a “strong buy” and two as a “buy”.

One of the main reasons that the stock of Discovery Laboratories, Inc. is trading near its yearly low could be the fact that in May the company floated a secondary offering to raise about $14 million, which is not reflected in the above numbers. For a small company to raise this much money usually means that they have some pretty good product candidates.

Founded in 1992, and public for nearly seventeen years, Discovery Labs is developing products for critical care patients with respiratory diseases and care in pulmonary medicine. The company’s products include Surfaxin, a synthetic peptide-containing (KL4) surfactant, which has been approved for preventing respiratory distress syndrome (RDS) in premature infants; and KL4 surfactant in liquid, lyophilized, and aerosolized forms. This technology was initially developed at The Scripps Institute and further developed at Ortho-McNeil Pharmaceutical, a Johnson & Johnson company. Discovery Labs holds an exclusive worldwide license for this technology from J&J and Scripps. The company has filed a New Drug Application with the FDA for its product based on its KL4 surfactant technology.

In addition, the company is developing AEROSURF, a drug-device combination product that has completed pilot Phase II clinical trials for preventing RDS in premature infants; and AFECTAIR devices, which are novel disposable aerosol-conducting airway connectors. Discovery Labs has a strategic alliance with Laboratorios del Dr. Esteve, S.A. for developing and marketing a portfolio of potential KL4 products in Andorra, Greece, Italy, Portugal, and Spain.

Needless to say, Discovery is another one of those small biotechs with zilch revenues and mega losses. For example, during the quarter ending 3/31/13, revenue totaled $72,000 and losses came to $12.64 million.

This is a stock that seems to trade in a range and, right now, it is at the bottom end of the last 52-week range, so, anything could set the stock on a tear. It may help that they have the secondary offering out of the way and, also, the company appears to have some promising product candidates.

Our 24-month target for the stock is $2.75 to $3.00.

For more information, contact DSCO at 215-488-9300;

MEETME, INC. (NYSE MKT: MEET) – $1.68. Twelve-month hi-low has been $4.31 – $1.07. Based in New Hope, PA, with about 140 employees, this social media company has 38.1 million shares outstanding, $11.06 million in total current assets, $92.77 million in total assets, and $10.42 million in total liabilities, of which $1.35 million is long-term debt. Institutional ownership is around 43%. One analyst rates the stock a “strong buy” and one as a “buy”.

Before you gag and say ‘not another social media stock’, as we did when we first started looking at MeetMe, Inc. about a month or so ago, the company appears to be growing very nicely. And yes, it is unknown, for now, but just may be quirky enough to catch fire at some point.

Founded in 1997 as the Quepasa Corporation, and public for just over a year, MeetMe claims to make meeting new people fun through social games and apps, monetized by both advertising and virtual currency. The company has 60% of its customers coming from mobile, which could be huge, considering that Facebook would kill to have 60% from mobile. It operates MeetMe, which provides users with access to an expansive, multilingual menu of resources that promote social interaction, information sharing, and other topics of interest. The company also offers MeetMe apps on iPhone, iPad, and Android in various languages including English, Spanish, Portuguese, French, Italian, German, Chinese, Russian, and Japanese. In addition, MeetMe provides online marketing capabilities, which enable marketers to display their ads in various formats and in various locations on the Website.

What sort of pushed us over the edge in picking the stock was that toward the end of June MeetMe projected that their 2nd quarter revenue would total approximately $9 million, which means the company may be getting back to an upward momentum. Also, at that time, the company announced that it had made its mobile application traffic publicly available through Quantcast. Earlier in June, the company completed the rollout of native advertising to the MeetMe mobile feed.

For FY2012, ending 12/30/31, revenue was $46.65 million with $10.31 million in losses compared to FY2011 revenue of $10.7 million and$12.81 million in losses. During the quarter ending 3/30/13, revenue was $7.8 million with $7.33 million in losses.

MeetMe is not a household name like some other social media companies, but it could be a sleeper, and at its current price, it may be worth a flier.

Our 24-month target for the stock is $2.75 to $3.25.

For more information, contact MEET’s Joe Crivelli at 610-228-2100.

Look for the August 5, 2013 Newsletter to be posted on 8/1 or 8/2.

Thank you,