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Dear Reader,

By the time we post our next Newsletter, the war should be really close, if not underway, and our thoughts about the future of the markets are basically the same as covered in the last issue. Time to strap on the seat belts. We are either at the threshold of a great buying opportunity or a major market sell-off. And, yes, once again, most of the stocks in our Current Position Portfolio are still marking time.

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

U.S. Gold (USGL) (8/20/97). Our second oldest position, company shares start trading on the Berlin Exchange. Should war break out, USGL could have a nice jump.

DOR BioPharma (DOR) (9/20/00). Announces 50% enrollment in pivotal clinical trial of orBec. Remember, even though we still keep this on the “Endangered List”, stock could get a nice move up should war begin.

Antex Biologics (ANX) (11/20/00). Had to withdraw stock offering, which means company may be just barely hanging on. On “Endangered List”.

InSite Vision (ISV) (4/20/01). Receives patent allowance for Azalide use in topical ocular infection treatments.

Arotech (ARTX) (6/5/01). Former Time Warner CFO joins board. Year-end revenues triple, but losses inch up a bit with cash-on-hand at about $5 million. Orders backlog in excess of $8 million.

Abraxas Petroleum (ABP) (10/5/01). Another one that could get a boost from a war. Approves 2003 capital-spending budget and hedging agreements.

Saba Software (SABA) (11/20/01). Several product releases. Also, bags business from Petrobras, Brazil’s largest corporation.

Airspan Networks (AIRN) (1/20/02). Launches WipLL in Mexico.

Epoch Biosciences (EBIO) (1/20/02). Expands minor groove binder patent portfolio. Year-end and quarterly results pretty good and balance sheets still seems relatively healthy.

Aerogen (AEGN) (2/5/02). Raises “acquiring person” stake to 20% vs. 15%.

VASCO Security (VDSI) (2/5/02). Adds new distributors in South America and Germany. To provide strong authentication for CoStar property.

Catalyst Intl (CLYS) (3/20/02). Voluntarily moves to OTC Bulletin Board. Although year-end results were not great, they were not a death knell, so let’s give them a few more quarters before panicking.

Magic Software (MGIC) (3/20/02). Year-end results show less revenues but much narrower losses; balance sheet still looks pretty good.

Argonuat Technologies (AGNT) (4/20/02). Year-end numbers a lot better than the previous year, and although company now has $12.33 million in long-term debt, balance sheet appears half-decent.

Immersion (IMMR) (6/5/02). U.S. Army invests in company’s new trauma simulators. National Science Foundation awards IMMR $489,000 R&D grant.

BioTransplant (BTRN) (6/5/02). A few issues ago, we warned that this may go bellyup and it has. The company has filed for Chapter 11. Consider this position closed at 12ยข for a 96% loss.

InteliData (INTD) (6/20/02). Another one with some okay year-end numbers that expects profitability sometime this year, but, once again, war clouds keep the stock price subdued: hey, join the club.

Bruker AXS (BAXS) (6/20/02). And yet another with very decent year-end numbers and a solid-looking balance sheet to boot. Give us a break Dubya!!

Orbital Sciences (ORB) (8/20/02). Really good numbers for 2002, and, did we mention profits? Stock is nearing our 50% mark.

SpeechWorks (SPWX) (9/5/02). Text-to-Speech software selected by Boeing for military aircraft warning system. Partner with Vicorp to enhance Teleglobe’s Canada direct service.

Viewpoint (VWPT) (11/20/02). Fourth quarter numbers not good, but year-over-year shows a 29% increase in revenue and a 50% slash in losses; balance sheet still looks okay.

LogicVision (LGVN) (12/20/02). Product news release.

LookSmart (LOOK) (1/5/03). Stock takes a tumble on news that a new software called ByteShark could knock out web advertising. Could be an overreaction.

Kana Software (KANA) (1/20/03). British Telecom and Allergan dominate Kana news releases.

Allscripts (MDRX) (1/20/03). University of Colorado Hospital selects MDRX TouchWorks suite.

Avaya (AV) (2/20/03). A slew of news. Shareholders okay a rare reverse/forward stock split, which may occur sometime over the next year.

E*Trade (ET) (2/20/03). Several news articles in which ET is mentioned.

Our picks for this issue are a beaten-down semiconductor, and, of all things, an agro-business.

INTEGRATED SILICON SOLUTIONS, INC. (NASDAQ: ISSI) – $2.65. Twelve-month hi-low has been $14.88 – $2.36. Located in Santa Clara, CA, with nearly 300 employees, this semiconductor has 27.8 million shares outstanding, $99.7 million in total current assets, $173.9 million in total assets, little debt, and $31 million in total current liabilities. Institutional ownership is around 80%. Two analysts rate the stock a “strong buy” and one gives it a “moderate buy”.

One month we hear how semiconductors are doomed for the rest of eternity and the next month we learn how they will soon pull a Lazarus. We lean to the latter scenario and a company like Integrated Silicon Solutions should be among those scooped up during the next semiconductor buying spree.

Founded in 1988, and public since 1995, ISSI bills itself as a technology leader in the design and development of performance-memory semiconductors, and it is perhaps one of the largest producers of SRAMs (static random-access memory chips) in North America. The company also makes DRAMs (dynamic RAMs), specialized read-only memories, and voice recording chips. The major difference between SRAMs and DRAMs is that the former does not need periodic refreshing from the CPU to protect data from loss. SRAMs are used in computers, instrumentation, and telecommunications devices, while the company’s DRAMs are primarily used in PDAs (personal digital assistants), set-top boxes, disk drives, and networking equipment. In addition, ISSI has in development parallel search processors (CAM) and Bluetooth wireless chipsets which could help designers better meet demanding connectivity and bandwidth requirements. Most of the company’s manufacturing is done is Asia and it also has offices in China, Europe, Hong Kong, and Taiwan. Some of ISSI’s customers include Cisco, 3Com, Bose, Delphi, Huawei Technologies, IBM, LG Electronics, Motorola, Nokia, Seagate, and Sony. A few weeks aback, ISSI announced the industry’s first 8Mbit high-speed asynchronous SRAM and this is targeted at the company’s four focus markets – networking/broadband, digital consumer, mobile communications, and automotive. Basically this new innovation will offer customers higher-speed and lower-power devices.

For FY2002, ending 9/30/02, net sales were $70.44 million with net losses of $67.54 million compared to FY2001 net sales of $152 million and $1.1 million in net income. During the 1stQT of this FY, ending 12/31/02, net sales were $21 million with $1.22 million in losses (let’s hope this trend continues).

ISSI looks to be another one of those small techs, with an apparently healthy balance sheet, that has withstood the onslaught while continuing to provide cutting-edge technology.

Our 24-month target for the stock is $5.75 to $7.00.

For more information, call ISSI at 408-969-4774;

EDEN BIOTECHNOLOGY CORPORATION (NASDAQ: EDEN) – $1.25. Twelve-month hi-low has been $3.44 – $1.25. Based in Bothell, WA, with about 65 employees, this agro business has 24.3 million shares outstanding, $33.8 million in total current assets, $58.9 million in total assets, little debt, and $7.32 million in total liabilities. The Duval Trust owns about 11% of the company. One analyst rates the stock a “strong buy” and one has it on “hold”.

Sometimes it’s good to go off of the beaten paths and take a stab at something that is not much discussed, but is much needed, like food. Eden Bioscience seems to have unique technology that aids growers, and a balance sheet which could allow the company time to pull off its marketing efforts.

Founded in 1994, Eden develops and makes crop protection products that help crops protect themselves – sounds simple. The company’s relatively-new and patented technology is based on naturally occurring proteins called “harpins”, which activate natural plant growth and stress-defense responses. When applied to a plant, harpin protein binds to the plant’s receptors. The plant acts by sending a signal throughout itself, initiating a sequence of physiological and biochemical reactions. The growth response increases nutrient uptake, photosynthesis. vigor, and reproductive activity. The stress-defense response improves plant stamina, increasing stress tolerance.

Eden’s initial product is “Messenger” that the company dubs a plant health regulator. It received EPA approval for full commercial use in April, 2000, and has been tested in hundreds of field trials in several countries and on more than 40 crops, including citrus, cotton, tomato, and wheat crops. One of Messengers key attractions for growers is that it should enable them to reduce or eliminate chemical pesticides. Eden claims the product to be virtually non-toxic to humans and the environment.

Until recently, Eden’s revenues have been sporadic, at best, with agri-giant ConAgra Foods accounting for 70% of the company’s gross. However, last year, Eden changed its marketing strategy so as to focus on higher-value crops. The targeted crops for this year will be grapes, fruiting vegetables, strawberries, stone fruit, tobacco, and citrus. For FY2002, ending 12/31/02, revenue was $1.9 million with $23.5 million in losses compared to FY2001 revenue of $3.49 million and $23.7 million in losses.

This is totally a non-sexy company, but it’s just quirky enough to see its stock, now trading at historic lows from a high of $37.87 in October, 2000, get a nice bump during the next market updraft. Also, Eden’s balance sheet still appears healthy enough to give them some more time to see if the new marketing strategy pays off.

Our 20-month target for the stock is $2.25 to $3.00.

For more information, call EDEN’s Bradley Powell at 425-481-7509;

Look for the March 20, 2003 issue to be posted on 3/17 or 3/18.

Good luck,

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