HYDROGENICS CORPORATION & ORCHID CELLMARK, INC.

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Hello Readers,

Since the last Newsletter, we closed one position, for a pretty nice gain.

AMERICAN TECHNOLOGY (8/5/06). Closed position 9/5/06 at $3.45 for a 60% GAIN.

We must remind you that American Technology is the exception and not the norm; it was in the Current Portfolio for less than two months. Since picking it, ATCO climbed pretty steadily behind some pretty good news.

This isn’t supposed to be. Traditionally, September has been the worst month of the year for the markets. What is different this time? The simple explanation being served up is plunging oil prices, and that makes sense to us. However, the month isn’t quite over, just yet, and, soon, inventors will find something else to fret about, such as another spike upward in crude prices, the upcoming mid-term elections, etc. But, for now, 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.

SCO Group (SCOX) (8/20/06). Quarterly numbers no big surprise; balance sheet still looks good.

Microvision (MVIS) (7/20/06). Awarded $5.95 million U.S. Army contract through General Dynamics to develop full-color helmet mounted displays. Joins partner program to drive development of bar code applications for smartphone OS.

NS Buzztime (NTN) (7/5/06). Debuts its QB1 Predict-the-Play game on mobile phones and the Internet. Announces QB1 promotion in partnership with Buffalo Wild Wings.

Point Therapeutics (POTP) (7/5/06). Presents new data to support Talabostat’s ability to stimulate key cytokines essential to immunostimulation. And, no we haven’t a clue as to why the stock has dropped to current levels.

BSQUARE (BSQR) (6/20/06). Claims its new Monahans reference design offers OEMs optimized power management with dialog’s system-on-chip (SoC).

Curis (CRIS) (6/5/06). Forms Chinese subsidiary and announces new cancer programs. Opts out of co-development of basal cell carcinoma drug candidate.

ICAD (ICAD) (5/20/06). FUJIFILM Medical Systems USA inks pact to distribute iCAD products to the digital mammography market. Names new CFO.

O2 Diesel (OTD) (5/20/06). Introduces the first school bus using its proprietary ethanol diesel fuel in Mead, NE. Nellis Air Force Base triples its use of OTD’s diesel fuel.

Kintera (KNTA) (5/5/06). Expands social constituent relationship management roadshow to accommodate demand.

Tri-S Security (TRIS) (5/5/06). Gets $1.45 million in new business contracts and snares another $5.9 million in contract extensions.

Pharmos (PARS) (4/20/06). Revises acquisition terms with Vela.

ThermoGenesis (KOOL) (4/5/06). Fiscal year-end balance sheet looks very healthy.

Q Comm (QMM) (3/5/06). To present at Noble Financial’s ONTRACK 2006 conference on September 26.

Lipid Sciences (LIPD) (2/20/06). To present at AG Edwards’ emerging growth conference on September 20.

Gateway (GTW) (2/5/06). Numerous releases. Most notable perhaps is naming of a new CEO.

8X8 (EGHT) (1/20/06). Several new releases about new products and upgrades. To present at the AG Edwards’ confab on September 20 and at the Merriman Curhan Ford investor summit on September 19.

Ceragon Networks (CRNT) (1/5/06). KyivStar deploys $1.8 million of Ceragon’s FibeAir 1500 HP.

Digital Angel (DOC) (12/20/05). DOC’s electronic RFID livestock tag sales for 2006 so far exceed total sales for full year 2005. To present at Merriman confab on September 18, the day we post this Newsletter.

Memory Pharma (MEMY) (11/5/05). Initiates Phase 2a trail of MEM 1003 in bipolar disorder.

RAE Systems (RAE) (10/5/05). Signs distribution pact with Electro Rent. Releases radiation software upgrade. CEO letter to shareholders.

Infinity Pharmaceuticals (INFI) (10/5/05). This was Discovery Partners until a week ago when the merger and 4 for 1 stock split kicked in. And, surprise of surprises, this is one reverse split that, so far, has been very kind to the existing shareholders.

EntreMed (ENMD) (9/5/05). Commences Panzem NCD Phase 2 study in prostate cancer.

N.A. Scientific (NASI) (8/5/05). Quarterly report shows losses widening; balance sheet still looks good.

Electric City (ECLY.BB) (7/5/05). Several releases. This one is on the “Endangered List”.

Verticalent (VERT) (4/5/05). Several news items. This, too, is on the “Endangered List”.

Advancis Pharma (AVNC) (12/20/04). Says its has enough data to file NDA with the FDA for Amoxicillin PULSYS.

Applied Micro Circuits (AMCC) (11/20/04). Stock takes a stumble as AMCC says it must restate results to recognize up to $200 in option expenses dating back to 1998. A few releases on products.

Nova Measuring (NVMI) (11/5/05). Announces auction of right to license or buy some of its patents.

Aviza Technology (AVZA) (10/5/04). Ships multiple thermal processing systems to a 300-mm foundry in Singapore. Also receives order for multiple RVP-300 plus systems for Taiwanese foundry.

Network Engines (NENG) (6/5/04). Named by Deloitte as one of New England’s fastest growing technology companies.

TMNG Global (TMNG) (4/20/04). Strengthens relationship with Intec via mobile virtual network enabler platform. Approves share repurchase program.

Palatin Technologies (PTN) (4/5/04). Fiscal year-end balance sheet still looks healthy, but losses double year over year.

OpenTV (OPTV) (3/20/04). Teams with Innovative Systems to deliver turnkey IPTV solution. Licenses S3 software to enable expedited time to market for STB manufacturers. Collaborates with weComm on mobile TV services. Extends Digiturk deal.

Monogram Biosciences (MGRM) (7/20/01). Plans to raise $37.4 million through stock sale.

Our picks for this Newsletter are an alternative energy developer and a diagnostic provider, both trading on NASDAQ.

HYDROGENICS CORPORATION (NASDAQ: HYGS) – $1.65. Twelve-month hi-low has been $4.40 – $1.61. Located in Mississauga, Ontario, Canada, with about 250 employees, this alternative energy provider has 91.8 million shares outstanding, $96.64 million in total current assets, $200.5 million in total assets (over $100 million is goodwill/intangibles), little debt, and $21.5 million in total liabilities. Institutional ownership is around 22%. One analyst rates the stock a “strong buy”, one a “moderate buy”, and two have it as a “hold”. www.hydrogenics.com

We were going to add Hydrogenics Corporation to the Current Portfolio a few months ago when the stock was nearly double its current price, but decided to back off so as to see if the energy sector would cool a little, and it has, for now. However, energy prices will probably go much higher over the next several years, and Hydrogenics, with its good balance sheet and promising outlook, should see it stock climb again.

Founded in 1990, and public for about five years, Hydrogenics bills itself as a global developer of energy solutions, which consist of onsite hydrogen generation products, fuel cell power products, and fuel cell test systems. Its three core business areas are: The OnSite Generation Group sells the hydrogen generation products to industrial, transportation, and renewable energy customers. The Power Systems Group sells the fuel cell products to OEMs, systems integrators and users for stationary applications, such as backup power, and light mobility operations like forklifts. The Test Systems Group sells fuel cell test station products to OEMs, fuel cell and fuel cell component developers to validate their fuel cell products, and provides testing services to third parties to validate their fuel cell development efforts. About two years ago, Hydrogenics acquired Stuart Energy Systems.

Some of the company’s projects include Toronto’s first hydrogen refuelers, the Wind-Hydrogen Village on Prince Edward Island, and power plant cooling in Bulgaria.

In August, Hydrogenics joined the Hybrid Consortium to participate in developing plug-in hybrid vehicles. Of major importance during that month, the company was awarded a supply agreement from American Power Conversion to deliver up to 500 fuel cell power modules for backup power applications.

For FY2005, ending 12/31/05, revenue was $37.19 million with $53.14 million in losses. During the first six months of the current FY, ending 6/30/06, revenue was $11.5 million with $17.96 million in losses. The company attributes the revenue drop to production snags, which it believes have been resolved.

Hydrogenics is one of those alternative energy plays that could work, given the world’s appetite for oil, gas, etc.

Our 24-month target for the stock is $3.00 to $3.25.

For more information, contact HYGS’ Lawrence Davis at 905-361-3633; ldavis@hydrogenics.com

ORCHID CELLMARK, INC. (NASDAQ: ORCH) – $2.25. Twelve-month hi-low has been $10.09 – $1.93. Located in Princeton, NJ, with about 395 employees, this diagnostic provider has 24.4 million shares outstanding, $26.2 million in total current assets, $49.29 million in total assets ($12.8 million in goodwill/intangibles), little debt, and $12.89 million in total liabilities. Institutional ownership is around 56%. One analyst rates the stock a “strong buy”.

Orchid Cellmark, Inc. has had some difficulties over the last six to nine months, but maybe it’s time for the stock to see a “dead cat bounce”. The company, which is in a hoped-for turnaround, has a half-decent balance sheet, although we would like to see its cash burn rate ease, and it is in a fast growing industry.

Founded in 1995 as Orchid Biosciences, and public for nearly five years (and, yes, the stock appears to have hit $220 in the heady days of 2000), Orchid provides DNA services for the human identity and agricultural markets; it has operations in both the U.S. and the UK. For the human identity area the company provides DNA testing services for forensic, family relationship, and security applications. In the animal and agricultural field, it provides the same services for food safety and selective trait breeding. Orchid conducts forensic DNA testing mainly for government agencies; family relationship testing services to both government agencies and individuals; and security DNA testing services to government agencies, companies, and individuals. Government agencies and companies are the primary customers for the company’s animal and agricultural DNA testing services.

Orchid recently launched its Heritage ID product line, which, obviously, is to help people establish their genetic heritage. Aimed primarily at the funeral industry, the service gives families a way to preserve their relatives’ genetic information. This service will also target Native American tribes so that they can confirm the familial relationship of specific individuals for tribal enrollment application and other benefits.

We should once again stress that Orchid Cellmark is in a turnaround situation and needs to do more cost cutting. For FY2005, ending 12/31/05, revenue was $61.6 million with $9.44 million in losses. During the first six months of the current FY, ending 6/30/06, revenue was $26 million with $10.43 million in losses. The company blames much of the revenue decline in price decreases in the forensic DNA market, and ORCH expects further “operational challenges” for the balance of this year.

Yes, Orchid needs to streamline and better capitalize on its services. We think they should pull it off.

Our 24-month target for the stock is $4.00 to $4.25.

For more information, contact ORCH at 609-750-2324; ir@orchid.com

Look for the October 5, 2006 Newsletter to be posted on 10/2 or 10/3.

Thank you,
George