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Hello Readers,

Since the last Newsletter, we have closed seven positions; four for gains and three for losses.

PIXELWORKS (11/20/10). Closed position 8/7/13 at $5.20 for a 57% GAIN.

SENOMYX (5/20/12). Closed position 8/2/13 at $3.83 for a 64% GAIN.

VICAL (6/20/13). Closed position 8/2/13 at $4.45 for a 52% GAIN.

PERFORMANCE TECHNOLOGIES (7/20/09). Closed position 8/12/13 at $3.60 for a 25% GAIN.

BIODEL (2/20/11). Closed position 8/7/13 at $5.18 for a 35% LOSS.

(price reflects reverse stock split)

USA TECHNOLOGIES (6/5/09). Closed position 8/2/13 at $2.10 for an 18% LOSS.

ECOtality (11/5/11). Closed position 8/12/13 at 40 cents for a 75% LOSS.

Pixelworks rocketed on good earnings news and strong guidance, and, after, a long wait, it was nice to take the gain. A good-looking earnings report sent Senomyx shares on a nice tear, which was a nice surprise. Our second time around with Vical worked well, and the only surprise here is the speed at which the stock hit our 50%-plus threshold. Performance Technologies, which had been on the “Endangered List”, stunned us when it roared to a 25% gain on pretty good earnings news; this, too, was another pleasant surprise, after waiting a very unusual five years. We don’t usually give stocks this much time to work, but we finally had it with USA Technologies and took the minor loss. We also closed Biodel for a less-than-expected loss and we wish they had not done that reverse split. The real shocker over the last month came when ECOtality, from out of the blue, said it may need to file bankruptcy due to failing to increase sales; no more EV picks for us.

Over the last few weeks, the markets had a slight sell off, which some are calling a minor correction, and this has put downward pressure on much of the Current Portfolio. And, unfortunately, during nasty sell offs, small stocks get hit the hardest. With all of the liquidity still floating around, we have not a clue as to how the rest of August will go, a period that usually disappoints. One thing we have learned over the years is that the markets typically do the opposite of what is expected.

Here are the headlines since the last Newsletter about companies in the Current Portfolio; dates in parentheses are when we recommended them. We are not giving updates about companies on the “Endangered List” unless we feel the news to be very significant.

Towerstream (TWER)(8/5/13). Recent numbers were so-so; balance sheet still looks strong.

Solta Medical (SLTM)(8/5/13). Stock gets a spanking as earnings disappoint; balance sheet still looks good.

Discovery Labs (DSCO)(7/20/13). Latest balance sheet still looks pretty good.

MeetMe (MEET)(7/20/13). Releases upbeat earnings report; balance sheet still looks good.

Baxano Surgical (BAXS)(7/5/13). Quarterly numbers not great; balance sheet still looks good.

Commtouch Software (CTCH)(7/5/13). Recent numbers look pretty, as does balance sheet, but one brokerage firm gives the stock a downgrade to “neutral”.

Velti PLC (VELT)(6/20/13). Slates earnings call for August 20.

Antares Pharma (ATRS)(5/20/13). Recent balance sheet looks very healthy.

MELA Sciences (MELA)(5/5/13). Recent balance sheet looks pretty good. Company to restructure and cuts staff by 25%.

Cytori Therapeutics (CYTX)(5/5/13). Balance sheet still looks good. Cytori Celution System approved in Australia.

Synacore (SYNC)(4/20/13). Quarterly numbers could have been better; balance sheet still looks good. Selected by Grupo TVCable Ecuador for next-gen portal, email services, and Future TV Everywhere.

iPASS (IPAS)(4/5/13). Quarterly numbers on the soft side; balance sheet still looks good. Company supplies Skype with global Wi-Fi infrastructure. TTNET offers international Wi-Fi roaming service from iPASS.

Joe’s Jeans (JOEZ)(3/20/13). Open new retail store in Las Vegas.

Oncothyreon (ONTY)(3/20/13). Balance sheet still looks very healthy.

Echelon Corp (ELON)(3/5/13). Latest quarterly numbers not great; balance sheet still looks strong.

Alphatec Holdings (ATEC)(2/20/13). Recent revenue numbers show continued growth; balance sheet still looks good.

Apricus Biosciences (APRI)(2/5/13). Provides corporate update. Receives national phase approvals for Vitros in Ireland and the Netherlands.

Gevo, Inc. (GEVO)(1/20/13). Recent balance sheet looks good as company gives extensive update in recent quarterly report.

Codexis (CDXS)(1/5/13). Receives notice alleging breach of Dyadic license agreement, which puts pressure on stock; and, yes, company disagrees. Recent balance sheet looks pretty good.

Horizon Pharma (HZNP)(12/20/12). Recent quarterly report is upbeat as sales slip; balance sheet still looks very good.

Limelight Networks (LLNW)(11/20/12). Expands presence in India. Revenues and earnings could have been better; balance sheet still looks very strong.

Lionbridge Technologies (LIOX)(11/5/12). Recent quarterly numbers look good, as does balance sheet.

Zynga (ZNGA)(10/5/12). The usual several dozen news stories; most notable perhaps is a major shakeout of top executives.

ImmunoCellular Therapeutics (IMUC)(9/20/12). Balance sheet still looks good.

SemiLEDS (LEDS)(8/20/12). More class action law suits are filed against the company.

Aviat Networks (AVNW)(7/20/12). Recent numbers nothing to write home about; balance sheet still looks strong.

Athersys (ATHX)(7/5/12). Gets grant to support clinical advancement of its MultiStem regenerative medicine program for heart attack patients. Balance sheet still looks good. To present at stem cell confab on October 14 or 15.

Rare Element Resources (REE)(6/20/12). Extends 2013 Bear Lodge development drilling. Reports 6/30/13 financial results.

Capstone Turbine (CPST)(5/20/12). Secures large 6MW follow-on order from mid-Atlantic gas producer. Revenues miss expectations but company claims $155.8 million backlog; balance sheet still looks okay.

AirMedia Group (AMCN)(4/20/12). Recent quarterly report a mixed bag; balance sheet still looks pretty good.

Axcelis Technologies (ACLS)(4/5/12). Recent numbers disappoint; balance sheet still looks good.

Geron Corp (GERN)(2/5/12). Balance sheet still looks healthy.

Cover-All Technologies (COVR)(7/20/11). Recent revenue numbers look promising although losses can use paring; balance sheet still seems okay.

On Track Innovations (OTIV)(6/20/11). Sells its SmartID division for $10 million to SuperCom.

GSE Systems (GVP)(4/20/11). Looks like the last quarter wasn’t good for a lot of companies as this one reports so-so numbers; balance sheet still looks good.

ThermoGenesis (KOOL)(4/5/11). Announces launch of successful bone marrow transplant program with Totipotent.

Alpha Pro Tech (APT)(7/20/10). Releases pretty good quarterly numbers; balance sheet still looks good.

NovaBay Pharmaceuticals (NBY)(4/20/10). Balance sheet still looks okay.

Novavax (NVAX)(4/5/10). Balance sheet still looks very healthy.

GlobalScape (GSB)(5/20/08). Recent numbers not bad; balance sheet still looks good. We may soon be closing this for the simple reason it has been in the Current Portfolio since the beginning of time.

Our picks for this Newsletter are another biotech and a semiconductor equipment provider; both trade on NASDAQ.

GALENA BIOPHARMA, INC. (NASDAQ: GALE) – $1.95. Twelve-month hi-low has been $3.00 – $1.23. Based in Lake Oswego, OR, with about fifteen employees, this biotech has 83.5 million shares outstanding, $27.5 million in total current assets, $61.45 million in total assets, little long-term debt, and $38.14 million in total liabilities. Institutional ownership is around 8%. One analyst rates the stock a “strong buy” and ten as a “buy”.

And yes, here we go again. A few years ago, we picked Galena Biopharma, Inc. and it worked out well back then. The difference this time seems to be the number of analysts flashing a “buy” on the stock, which, for a small company, is nearly unheard of. So, maybe they are a lot smarter than we are.

Founded in 2003, and public for over five years, Galena focuses on developing a pipeline of immunotherapy product candidates for treating various cancers based on the E75 peptide. The company’s lead product candidate is NeuVax, a human epidermal growth factor receptor 2 (HER2) peptide-based cancer vaccine currently being evaluated in a Phase 3 trial for the adjuvant treatment of breast cancer. The therapy is being developed to prevent disease recurrence in breast cancer patients who successfully achieve remission following surgery, radiation, and/or chemotherapy.

Galena is also developing Folate Binding Protein E-39, a targeted vaccine that is in Phase 1/2 clinical trials for preventing the recurrence in gynecological cancers, such as ovarian and endometrial adenocarcoimas. In addition, the company markets Abstral, which is a rapid-onset opioid approved for treating breakthrough pain in cancer patients. The product is a sublingual tablet formulation of fentanyl that dissolves rapidly under the tongue and Galena intends to launch the product during the 4thQT of this year.

Galena is typical of most small biotechs in that it has been making little, if any, money while toting up big losses. As an example, for the quarter ending 3/31/13, revenue was zilch and losses were $9.3 million. This may change once the company actually starts selling Abstral.

Could the prospect of eye-popping sales from Abstral be the factor drawing attention from nearly a dozen analysts? This could be a factor.

Our 24-month target for the stock is $3.25 to $3.75.

For more information, contact GALE’s Remy Bernarda at 503-405-8258;

MINDSPEED TECHNOLOGIES, INC. (NASDAQ: MSPD) – $2.85. Twelve-month hi-low has been $5.27 – $2.28. Based in Newport Beach, CA, this semiconductor equipment provider has 43.2 million shares outstanding, $81.23 million in total current assets, $162.17 million in total assets, and $113.65 million in total liabilities, of which $52.37 million is long term debt. Institutional ownership is around 72%. One analyst rates the stock a “strong buy”, three as a “buy”, and three as a “hold”.

And here we go again with another oldie but goodie. Several years ago, we picked Mindspeed Technologies, Inc. and it worked out quite well. Now, we are going again, but perhaps for slightly different reasons, one of them being that the company has hired Morgan Stanley to advise on strategic alternatives, including possible buyout offers. Yes, the long-term debt looks awful, but it appears to be the sort that is manageable.

Founded in 2001, and public for just under ten years, Mindspeed designs and sells semiconductor solutions for communications applications in the wireline and wireless network infrastructure, which includes enterprise networks, broadband access networks (fixed and mobile), and metropolitan and wide area networks (WAN). Solutions for these networks have been organized into three product families: communications convergence processing, formerly known as multiservice access, high-performance analog, and WAN communications. Its products are also sold to OEMs for use in a variety of network infrastructure equipment. Mindspeed customers include Alcatel-Lucent, Cisco Systems, Huawei Technologies, and Zhongxing Telecom Equipment.

The company claims it has been reforming its operations to produce products for the 3G and 4G long-term evolution (LTE) end market. LTE is the newest and fastest wireless data connection you can get on your cellphone or tablet. Mindspeed expects the 4G/LTE small cell market to be a long-term grower, with a few bumps in the road. However, although LTE is currently only a small slice of current revenue, this could grow tremendously over the next several years. And, this is one the main reasons that Mindspeed could be a takeover down the road.

For the FY ending 9/27/12, revenue was $141 million with $32.75 million in losses. For the first six months of the current FY ending 3/29/13, revenue was $79.77 million with $39.1 million in losses. The next quarterly numbers will be released on 7/30/13.

Even if Mindspeed is not taken over, the company’s future could greatly brighten from the expected growth in LTE revenues.

Our 24-month target for the stock is $5.00 to $5.50.

For more information, contact MSPD’S Kevin Trosian at 949-579-3111;

Look for the September 5, 2013 Newsletter to be posted on 9/3 or 9/4.

Thank you,