GENE LOGIC, INC. & VOCALTEC COMMUNICATIONS, LTD.

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Hello Readers,

Since the last Newsletter, we have closed six positions; three for some nice gains, one was a wash, and two were nasty losses.

IMMUNOGEN (10/20/06). Closed position 4/13/07 at $6.20 for a 57% GAIN.

ETRIALS (1/20/07). Closed position 4/13/07 at $5.38 for a 51% GAIN.

ALFACELL (11/20/06). Closed position 4/10/07 at $2.40 for a 55% GAIN.

QUOVADX (4/5/07). Closed position 4/10/07 at $2.90 for a 3% GAIN.

SOCKET COMM (3/20/04). Closed position 4/10/07 at $1.00 for a 65% LOSS.

LIME ENERGY (7/5/05). Closed position 4/9/07 at 95¢ for a 92% LOSS.

We suspect that Immunogen caught the wave that many biotechs have been riding since early this month; many companies in the sector were buoyed by analysts’ upgrades. Ever since we picked Etrials, in January, the stock had been climbing pretty steadily thanks to a drumbeat of good news. Alfacell went on a tear shortly after releasing news that researchers had identified the intracellular pathway of ONCONASE. For the first time in our ten-plus years of publishing this Newsletter, news that a pick of ours was acquired within minutes prior to us posting the April issue with Quovadx, and we are truly sorry for this, since there was no time to take advantage of the situation. We also closed Socket Communications and Lime Energy for some very ugly losses; both of these had been on the “Endangered List”.

During the last few weeks, the markets saw their longest rally in four years. Now, everyone is asking if this momentum can continue for any length of time. We think so, for the simple reason that many of the gurus are expecting major pullbacks and, too often, they are wrong. We sense that the markets may be climbing a wall of worry, which occurs when investors keep buying out of fear of being left out. Yes, the usual bugaboos can mess things up, i.e. surging energy prices, terrorism, or higher interest rates.

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

Depomed (DEPO) (4/5/07). Asks FDA to approve new formulation of Glumetza tablet.

Zix Corporation (ZIXI) (3/20/07). Brokerage CE Unterberg Towbin gives the stock a “buy” rating. Will announce 1st> QT results on May 8; sees revenue within its forecast range of $4.9 million to $5.1 million.

Immunicon (IMMC) (3/20/07). Will exhibit at the AACR confab in LA, CA April 15 to the 18th. Expands research collaboration with Kreatech Biotech B.V.

CommTouch (CTCH) (3/5/07). Signs eleven new licensing agreements during the first quarter.

Neurobiological Technology (NTII) (2/20/07). Stock sinks after company announces it will issue a $7 million secondary stock offering. These things are usually good for a company’s long-term health, but play havoc on the stock for a while.

Urologix (ULGX) (2/20/07). Sees lower revenue and a loss for a 3rd> QT, which puts pressure on stock. CE Untergerg Towbin downgrades the stock.

UQM Technologies (UQM) (2/5/07). First round of crash test a success for Phoenix Motorcars which is powered by UQM’s propulsion system.

Endologix (ELGX) (1/20/07). World’s first ELGX Powerlink System procedures performed with Visiflex SurePass delivery system. Sun Trust Robinson Humphrey initiates coverage on the stock.

CardioTech (CTE) (12/20/06). Launches new web site to showcase company’s technology and products.

Lantronix (LTRX) (12/5/06). Launches DeviceConnection.net, an online M2M application developer community for engineers. Unveils third generation 802.11 b/g wireless M2M embedded networking module.

WJ Communications (WJCI) (12/5/06). Completes transition to fabless business model.

YMI Biosciences (YMI) (11/5/06). Appoints new management to oversee lead drugs.

Terabeam (TRBM) (11/5/06). Subsidiary Ricochet to provide Denver with “Wi-Fi in the Mile High” wireless access.

Autobytel (ABTL) (10/5/06). Rated number one customer management tool in Auto Dealer Monthly’s third annual Dealer’s Choice Awards.

Advanced Life Sciences (ADLS) (7/20/06). Brokerage Rodman & Renshaw initiate coverage on the stock.

NTN Buzztime (NTN) (7/5/06). Announces share repurchase plan. TV division unveils newly updated Crazy Golf 2.0 on its interactive entertainment network.

Point Therapeutics (POTP) (7/5/06). Announces preclinical data presentations. This one is on “Endangered List”.

02Diesel (OTD) (5/20/06). U.S. DOD begins testing of OTD’s new alternative fuel blend. Enters pact with Fair Energy targeting Central American fleets.

Kintera (KNTA) (5/5/06). Faith-based organizations select Kintera Sphere to advance their ministries and raise funds.

Tri-S Security (TRIS) (5/5/06). Subsidiary Paragon Systems okayed for NATO international competitive bidding.

TII Network (TIII) (3/20/06). Quarterly numbers a little off, but still shows profit; balance sheet still looks good.

Gateway (GTW) (2/5/06). Several news releases on products. Stock price holds steady despite takeover talk cooling.

8×8 (EGHT) (1/20/06). Receives new video patent. To present at Piper Jaffray confab on May 9-10 and at Micro Cap confab on May 7. Reports Packet8 Virtual Office subscriber base now exceeds 7000 businesses.

Digital Angel (DOC) (12/20/05). Completes acquisition of McMurdo Marine Electronics. Awarded $1.7 million contract from Omani Air Force.

Fusion Telecom (FSN) (12/5/05). Surpasses one million subscribers to its Efonica VoIP service. Year-end numbers not great, but 4th QT shows some promise; balance sheet also not great. We’re tempted to place this on the “Endangered List” but want to see the next quarter or two.

RAE Systems (RAE) (10/5/05). South Carolina Emergency Management Agency standardizes on AreaRAE Wireless Sensor networks.

Zi Corporation (ZICA) (8/5/05). Settlement agreement with Marty Steinberg, receiver for the Lancer Funds, is effective.

B.O.S. (BOSC) (1/5/05). Issues reminder for the exercising of its rights. Wins new customers in Europe; receives $500,000 on orders for electronic components.

Applied Micro Circuits (AMCC) (11/20/04). Will release FY2007 results on May 1. Introduces several new products.

Nova Measuring (NVMI) (11/5/04). Settles patent suit with Nanometrics.

Aviza Technology(AVZA) (10/5/04). Broadens Low-k intellectual property portfolio.

Management Network Group (TMNG) (4/20/04). Faces delisting for failure to file annual report on time; says several option grants misdated. We’re not overly worried about this, right now.

Our picks for this Newsletter are a solutions provider to the biotech industry and a telecom services company, both trade on NASDAQ.

GENE LOGIC, INC. (NASDAQ: GLGC) – $2.40. Twelve-month hi-low has been $4.75 – $1.11. Based in Gaithersburg, MD, with about 150 employees, this solutions provider has 31.8 million shares outstanding, $61.01 million in total current assets, $90.27 million in total assets, little debt, and $19.18 million in total liabilities. Institutional ownership is around 35%. One analyst has the stock as a “hold”. www.genelogic.com

It is probably safe to conclude that Gene Logic, Inc. is going through a transitional/restructuring stage and its healthy-looking balance sheet should help give it a better than even chance of turning things around.

Founded in 1994, and public since 2000, Gene Logic provides drug discovery and development solutions to pharmaceuticals and biotechs worldwide through two business units, which are Genomics Services and Drug Repositioning and Selection. The Genomics segment consists of proprietary reference gene expression and toxicogenomics databases and services, software tools, microarray data generation and analysis, and other professional services. These services enable customers to discover and prioritize drug targets, identify biomarkers, predict toxicity, and obtain insights into the efficacy of specific compounds. This division’s product offerings include BioExpress System, BioExpress Disease and Custom Suites, BioExpress Individual Samples, ASCENTA System, SCIANTIS System, ToxExpress System, ToxSuite Datasets, ToxShield Suite, and Genesis Enterprise System Software.

The Drug Repositioning and Selection (DRS) program consists of a series of molecular pharmacology technologies used to assist customers in identifying alternative indications for failed, stalled, or deprioritized compounds; expanding indications for marketed drugs; and prioritizing and identifying indications for compounds entering preclinical development.

As of now, Gene Logic’s partnerships include Pfizer, Hoffman-La Roche, Eli Lilly, and Organon. During 2006, the company began evaluating more than 40 clinical stage drug candidates for new therapeutic use from compounds originating through these partnerships. At the end of March, GLGC named a new CEO.

Gene Logic is transforming itself into a biopharma through drug development partnerships with major pharmaceuticals, which is probably a wise thing to do, since the Genomics segment has seen a major revenue drop. For FY2006, ending 12/31/06, total company revenue was $24.34 million with $54.7 million in net losses versus 2005 revenue of $57.19 million and $48.3 million in losses.

While the company further restructures, we could see another division being sold, as was the case last year when Gene Logic sold its Preclinical Division. As long as GLGC can continue forming partnerships with the major pharmas, the company could pull off the transformation.

Our 24-month target for the stock is $4.00 to $4.50.

For more information, contact GLGC’s Christopher Culotta at 301-987-1752; investors@genelogic.com

VOCALTEC COMMUNICATIONS, LTD. (NASDAQ: VOCL) – $3.08. Twelve-month hi-low has been $8.98 – $3.15. Located in Herzliya, Israel, with about 85 employees, this telecom services company has 7.4 million shares outstanding, $12.51 million in total current assets, $24.58 million in total assets, little debt, and $6.1 million in total liabilities. Institutional ownership is less than 2%. www.vocaltec.com

Yes, we add even another Israeli company to the Current Portfolio. Not only does VocalTec Communications, Ltd. have a decent balance sheet, it also appears that the company is snapping out of a revenue downtrend.

Founded in 1994, and public for over eleven years, VocalTec provides carrier-class multimedia and voice-over-Internet (VoIP) for communication service providers. It provides trunking, peering access gateway, and service delivery solutions that enable deployment of networks. VocalTec’s solutions handle media processing, signaling, security, and service creation within networks. The company’s main products include TdGATE IP and the TdMAX access gateways, which allow service providers to connect their traditional access to an IP backbone; TdGATE 3X00, a voice over broadband gateway that allows service providers to provide ISDN and telephony services over broadband access infrastructure based on ATM AAL2 standards; and Hunt 8110, a broadband access concentrator that can aggregate various types of traffic coming from the enterprise network, including TDM and IP, towards the ATM network.

VocalTec’s product line also includes Essentra BAX application server, which enables the delivery of residential and hosted enterprise VoIP services over broadband infrastructure; Essentra CX Media Gateway controller that allows wholesale and retail long distance carriers to migrate their legacy trunking networks to VoIP-based networks; and Essentra EX Peering Manager that facilitates peering between SIP and/or H.323 networks. In addition, the company offers Essentra GATE that enables a standards based softswitch to control VoIP subscribers connected through V5.x and GR-303 access systems.

Some of VocalTec’s leading carriers are Deutsche Telekom and Telecom Italian San Marino. Company investors include Cisco Systems, HarbourVest Partners, Liberty View, and Deutsche Telekom.

Earlier this month, Ivory Coast telecom operator Alink agreed to deploy VocalTec’s Essentra products to build VoIP in West Africa. Late last month, the company received $1.8 million in new orders from Deutsche Telekom. At that time, VOCL said it is targeting sales growth between 70% and 90% for 2007.

For FY2006, ending 12/31/06, revenue was $7.28 million with $7.02 million in losses compared to 2005 revenue of $4.59 million and $6.63 million in losses.

We are going to take a giant leap of faith and hope that the company meets its 2007 revenue targets, or comes pretty close. We would also like to see some paring of the losses.

Our 24-month target for the stock is $5.25 to $6.00.

For more information, contact VOCL’s Gali Porat at +972-9-9703805; gali@vocaltec.com

Look for the May 5, 2007 Newsletter to be posted between May 1 and May 3.

Thank you,
George