ENTRUST, INC. & INCREDIMAIL, LTD.

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Hello Readers,

Since the last Newsletter, we closed two positions, our first for 2008.

Alphatec Holdings (6/20/07). Closed position 2/14/08 at $6.22 for a 73% GAIN.

American Micro Circuits (11/20/04). Closed position 2/13/08 at $8.03 for 42% LOSS.

Ever since we picked it last June, Alphatec Holdings has done nothing but virtually go up, which, in this market, seems like a major feat; helping to fan the flames, lately, was recent news that ATEC acquired a exclusive worldwide license for what it calls “dynamic” anterior cervical plate technology. A few months back, we said we would soon close American Micro Circuits because of its 1 for 4 reverse stock split, and these seldom benefit current shareholders.

Overall, the last week or so has seen a slight break from the carnage in the markets, but we are still leery; read our last five or six Newsletters to understand our apprehensions. Small stocks have mostly remained in place and our own Current Portfolio is still half blown apart, although not as badly as a month ago. Much technical damage has been done to small stocks and it will take time to repair, once the downturn is over, which, as we recently said, may be sooner rather than later. Time to bottom fish?

Here are the headlines since the last Newsletter about companies in our Current Portfolio. Dates in parentheses are when we first recommended them.

GSI Technology (GSIT) (2/5/08). Brokerage house Merriman Curhan Ford gives the stock a “buy”.

Neurogen (NRGN) (2/5/08). Company says it will pursue five clinical programs in 2008. Names new president/CEO.

Amicas (AMCS) (1/20/08). Schedules earnings call for February 29.

Nanophase Technologies (NANX) (1/20/08). Earnings report shows pretty good revenue growth and less losses; balance sheet still looks good.

Move, Inc (MOVE) (1/5/08). Hires more consumer and media advertising execs and ramps up ad efforts.

Hollis-Eden Pharma (HEPH) (12/20/07). Starts Phase I/II clinical trial in ulcerative colitis with novel oral anti-inflammatory drug candidate TRIOLEX. Presents additional data demonstrating activity of ADOPTONE in inducing cancer cell death.

Amerityre (AMTY) (12/5/07). Selected by Amigo Mobility as OEM supplier.

DigitalFx (DXN) (12/5/07). Selected by WoozyFly.com to provide streaming video services. And, no, we don’t know why the stock has been clocked this badly, but, this is indicative of many of our picks because of lousy market conditions.

Continuecare (CNU) (11/20/07). Releases some good-looking numbers, and surprise surprise, the stock falls a bit; balance sheet still looks very healthy.

Nucryst Pharma (NCST) (10/5/07). Year-end balance sheet still looks good.

American Technology (ATCO) (10/5/07). To present at Roth Capital conference on February 20. Despite poor quarterly numbers, company says it is off to a ‘solid start’ to FY2008; balance sheet still looks decent.

Boots & Coots (WEL) (9/20/07). Slates earnings call for March 11.

XATA (XATA) (9/20/07). Quarterly numbers so-so; balance sheet still looks good. Completes acquisition of GeoLogic Solutions.

Wave Systems (WAVX) (9/5/07). Wave’s TVTonic expands high-definition offerings through content license with ON Networks.

Iomai (IOMI) (8/20/07). Study shows self-applied Travelers’ Diarrhea vaccine patch comparable to clinician-applied vaccine patch.

Radcom (RDCM) (7/20/07). Company returns to breakeven on revenue growth and a modest net income; balance sheet could be better. To extend its Omni-Q for cellular networks to monitor mobile TV. Several other product announcements.

American Fiber Optic Products (AFOP) (7/20/07). To present at Roth Capital OC Conference on February 19.

Heska (HSKA) (7/5/07). Slates earnings call for February 26.

Pharmacyclics (PCYC) (6/20/07). Announces data and publication characterizing highly-selective HDAC inhibitor.

Xenonics (XNN) (6/5/07). Comes out with pretty good quarterly numbers; balance sheet okay but would like to see cash position improve. In a better market, the numbers may have sent the stock on a mild tear. Announces $915,000 Nighthunter purchase order. To present at Roth Capital confab on February 21.

Oncolytics (ONCY) (6/5/07). Announces publication of research on combination reovirus and radiation therapy.

Hana Biosciences (HNAB) (5/5/07). Announces top-line Phase 1 clinical trial data demonstrating Alocrest to be well-tolerated with promising anti-tumor activity.

Ore Pharmaceuticals (ORXE) (4/20.07). To announce FY2007 results on February 22.

VocalTec (VOCL) (4/20/07). Nexus Telecom of Brazil relies on VocalTec for VoIP. Over 50 services providers deploy IBM System x and VocalTec VoIP solution. Receives notice from NASDAQ that it faces delisting because the bid price of the stock is under a dollar; company basically has until August to rectify problem. These notices, right now, are probably going out to hundreds of companies due to the current market situation.

TTI Telecom (TTIL) (3/5/07). To report quarterly and FY2007 results on February 19.

Eon Communications (EONC) (2/5/07). Here’s another one facing NASDAQ delisting but will remain listed pending appeal; if that fails, company would probably list on the Bulletin Board.

UQM Technologies (UQM) (2/5/07). Receives generator order from Traction Technology Plc.

Endologix (ELGX) (1/20/07). Sets earnings news for February 21. Launches the Powerlink System in Japan. Comments on NEJM study highlighting advantages of minimally invasive endovascular repair.

Neose Technologies (NTEC) (12/20/06). Receives milestone payment from Novo Nordisk on Factor VIII program. This one keeps sinking like a rock and, for now, we are placing it on the “Endangered List”.

CardioTech (CTE) (12/20/06). Quarterly numbers probably what were expected; balance sheet still looks okay.

Lantronix (LTRX) (12/5/06). Recent numbers show slight revenue growth and a modest profit; balance sheet still looks good. And yet, the stock goes nowhere. No one said that crummy markets would be easy.

WJ Communications (WJCI) (12/5/06). Expands family of high-linearity and low-current InGaP/GaAs HBT Gain block amplifiers.

YM Biosciences (YMI) (11/5/06). Enrolls first patient in Phase II trial of Nimotuzumab in children with inoperable, recurrent brain cancer. Recent balance sheet still looks very healthy.

Proxim Wireless (PRXM) (11/5/06). Frost & Sullivan awards company 2008 Innovation of the Year Award for its MeshMax product line integrating WiMAX, Wi-Fi, and Wi-Fi mesh.

HealthStream (HSTM) (10/20/06). To release quarterly and year-end numbers on February 19.

Advanced Life Sciences (ADLS) (7/20/06). Sets earnings call for February 19.

02Diesel (OTD) (5/20/06). Receives AMEX delisting notice. This is on the “Endangered List”.

ThermoGenesis (KOOL) (4/5/06). Reports upbeat quarterly numbers; balance sheet still looks healthy. Announces new initiative to address veterinary regenerative medicine.

TII Network Technologies (TIII) (3/20/06). Achieves global TL9000 Certification.

The Inventure Group (SNAK) (3/5/06). To announce earnings news on February 20.

Lipid Sciences (LIPD) (2/20/06). And yet another one not in compliance with NASDAQ’s minimum $1 bid rule; they have until August 11 to comply.

MIND C.T.I. (MNDO) (2/5/06). Slates earnings call for February 27.

8×8 (EGHT) (1/20/06). Reissued patent. Offers free lifetime monthly service for Packet8 Mobile Talk Charter subscribers.

Zi Corporation (ZICA) (8/5/05). Introduces new Qix Mobile Search and Discovery engine. And yet another one receives a NASDAQ notice; they have until July 28 to get back over a dollar.

N.A. Scientific (NASI) (8/5/05). NASDAQ gives them until April 2 to regain compliance. This one has been on the “Endangered List”.

Vion Pharmaceuticals (VION) (5/20/05). Shareholders vote for a reverse stock split, which, as we have said in the past, these seldom help current stock owners. Expect more of this from companies whose stock is below a dollar. This one has been on the “Endangered List”.

Nova Measuring Instruments (NVMI) (11/5/04). Sets earnings news for February 19.

Network Engines (NENG) (6/5/04). Releases some good-looking quarterly numbers; balance sheet still seems okay but cash drops considerably.

TMNG Global (TMNG) (4/20/04). Sets earnings call for February 25.

Palatin Technologies (PTN) (4/5/04). Releases pretty dismal quarterly numbers; balance sheet still looks good. This, too, has been on the “Endangered List” for awhile.

OpenTV (OPTV) (3/20/04). Sets earnings call for February 21. This is on the “Endangered List”.

Our picks for this Newsletter are two software companies, both NASDAQ-listed.

ENTRUST, INC. (NASDAQ: ENTU) – $2.25. Twelve-month hi-low has been $4.60 – $1.60. Based in Addison, TX, with about 500 employees, this security software and services company has 61 million shares outstanding, $45.33 million in total current assets, $122.15 million in total assets ($60.21 million is ‘Goodwill’), little debt, and $63.7 million in total liabilities. Institutional ownership is around 46%. One analyst rates the stock a “strong buy”, one a “moderate buy”, and three have it as a “hold”. www.entrust.com

Admittedly, picking stocks, lately, has been like catching knives, but one would think that a company like Entrust, Inc., with a nice looking balance sheet and an improved P&L picture, should warrant some consideration.

Founded in 1994 and trading on NASDAQ for over six years, Entrust provides security software that secures digital identities and information. Its software and associated services allow business and governments to conduct transactions over wired and wireless networks, including the Internet. The company offers three distinct solution platforms: authentication, transaction monitoring, and information protection. These solutions include Entrust Identity Guard, a second-factor solution for dealing with identity theft and phishing; Entrust Extended Validation SSL Certificates, which provide compatible browsers with trust indicators to help protect the consumer online; and Entrust GetAccess that offers authentication and authorization for XML and Web services data. It also provides Entrust Risk Based Consumer Authentication solutions that defend against fraud by layering authentication methods to the risk associated with individual transactions.

In addition, Entrust offers Entrust Entelligence suite of solutions, including Entrust Entelligence Messaging Server for email security; Entrust Entelligence Group Share for network folder encryption; Entrust Entelligence Disk Security for protecting and encrypting files, hard drives, and removable data; and Entrust Authority for key public infrastructure implementations. It also offers zero touch fraud detection services. Entrust also provides various consulting, deployment, and training services.

Presently, more than 1650 government agencies and enterprises in more than 60 countries use Entrust solutions. Included among these are 7 of the top 10 global commercial banks, 8 of the top ten global telecom companies, 7 of the top 10 global pharmaceuticals, 8 of the top 10 global aerospace and defense companies, and 4 of the top 5 global petroleum companies.

In mid-February Entrust and BBS joined forces to provide managed PKI service in Europe; and announced its GetAccess secures the Kingdom of Saudi Arabia’s national information Centre E-Government portal. At the end of January, the company’s Network Shared Folder Encryption solution was chosen by China’s PXInfosec, an information security service provider. Also, around the same time, the U.S. Treasury selected IdentityGuard for online customer authentication.

For FY2007, ending 12/31/07, revenue was $99.66 million with $5.88 million in net losses versus 2006 revenue of $95.18 million and $15.13 million in losses. So, revenue has inched up somewhat while a big bite has been taken out of the loss column. During the 4thQT of FY2007, the company turned a profit. The company is expecting a 5% to 10% growth in revenues for 2008 with modest profits.

If Entrust has indeed turned a corner on the P&L, as seen so far, then the stock may be worth a shot.

Our 24-month target for the stock is $3.75 to $4.00.

For more information, contact ENTU at 972-713-5858; investor@entrust.com

INCREDIMAIL, LTD. (NASDAQ: MAIL) – $3.20. Twelve-month hi low has been $10.69 – $2.50. Based in Tel Aviv, Israel, with about 100 employees, this software and services company has 9.5 million shares outstanding, $25.41 million in total current assets, $34.23 million in total assets, little debt, and $9.3 million in total liabilities. Institutional ownership is negligible. One analyst has the stock as a “hold”. www.incredimail.com

Yes, here’s another of those Israeli companies we have heralded over the years. IcrediMail, Ltd. has a good balance sheet, is seeing revenue growing by leaps and bounds, and has been turning profits. The stock was hit a few months back because of a hassle with Google that now seems rectified.

Founded in 1999 as Verticon, and public for a little over two years, IncrediMail designs and markets a suite of email software products that creates an entertaining email experience by giving users the ability to design a customized and personal presentation. Ever wonder where all those emails with the artsy backgrounds come from? This is one source. IncrediMail generates revenue by selling premium software products, offering subscriptions to its content database, licensing and co-branding the Incredi brand to operators of third-party websites; and by selling paid advertising and sponsored links on its own website and email clients.

The company’s products include IncrediMail Xe, which offers various features, including pre-prepared backgrounds and letterheads, animated notifiers, emoticons, 3D effects, handwritten signatures, sound effects, and virtual cards, as well as a Web gallery with additional animations, notifiers, and email backgrounds; IncrediMail Premium, an enhanced version of IncrediMail Xe, with additional features, such as the ability to change the appearance of the product through the use of software skins, voice message recorder, advanced account access, and email-based user support; and IncrediMail Letter Creator, an application that enables users to design and create their own personalized email letters and ecards. Its products also consist of Gold Gallery, a content product that offers additional content files in the form of email backgrounds, animations, sounds, graphics, and email notifiers; IncrediMail Super Pack, a package of emoticons; JunkFilterPlus, an advanced anti-spam product; and Magentic, which enhances and enriches PC desktops by adding enhanced graphics.

At the end of 2006, IncrediMail’s products were available in eight language in addition to English. The company had more than 10.2 million users, and more than 330 million IncrediMail emails were sent by users each month. Also, MAIL had sold more than one million products and content licenses worldwide to registered users. We suspect that all of these numbers should show a measurable improvement during 2007.

For FY 2006, ending 12/31/06, revenue was $10.85 million with $2.47 million in net income. During the first nine months of FY2007, ending 9/30/07, revenue was $13.31 million with $1.78 million in net income.

This is one of those “what’s there not to like” companies.

Our 24-month target for the stock is $5.50 to $6.00.

For more information, contact MAIL at 3-5160195; incredimailpr@gmail.com

Look for the March 5, 2008 Newsletter to be posted on 3/3 or 3/4.

Thank you,
George

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