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Hello Readers,

It has now been at least six months since we started joining the gloom and doom crowd, and, frankly, because of the Fed flooding the universe with funny money, we thought that soon a light would appear at the end of the black hole. Then, an eerie thing happened on the way to the hoped-for recovery. Energy and commodity prices have soared because of the Fed’s rush to bail out the wealthy; a few Newsletters ago, we called it welfare for Wall Street, or something along those lines. The best thing the Fed can now do is to do simply nothing and let the markets finally run their course. The more they interfere, the longer the pain continues. We would have preferred to have seen a cataclysmic sell-off because that would have signaled the end to the catharsis. We are navigating unchartered waters, but the bottom-fishing could be good.

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

Micromet (MITI) (4/20/08). Enrolls first patient in a Phase 1 clinical trial with MT110, the first BiTE antibody for treating solid tumors

Kopin (KOPN) (4/20/08). To announce 1stQT results on May 6. Captures multi-million dollar U.S. Army program to produce ultra-high resolution microdisplays. Gets a nice plug in a Motley Fool article.

Replidyne (RDYN) (4/5/08). Slates earnings call for May 7. Stops respiratory drug study to conserve cash.

Rodman & Renshaw (RODM) (3/20/08). Sets earnings news for May 13. Has several successful underwritings.

Barrier Therapeutics (BTRX) (3/20/08). Quarterly numbers less than what was anticipated and company updates full-year revenue guidance; balance sheet still looks good. To present at Deutsche Bank health care conference on May 6.

Netsol Technologies (NTWK) (3/5/08). To release quarterly numbers on May 13. Venture Finance implements NetSol’s LeaseSoft suite to manage new block discounting portfolio. Expands North American senior management team.

ActivIdentity (ACTI) (3/5/08). Sets earnings release for May 12. Announces availability of 4TRESS Kerberos Agent for Microsoft IIS.

Entrusts (ENTU) (2/20/08). Stock upgraded by Avondale Partners. 1stQT numbers look pretty good as does balance sheet.

GSI Technology (GSIT) (2/5/08). Schedules earnings call for May 8.

Amicas (AMCS) (1/20/08). Sets earnings call for May 1, the day we post this Newsletter.

Nanophase (NANX) (1/20/08). 1stQT numbers show growth; balance sheet still looks good.

Move, Inc. (MOVE) (1/5/08). Earnings call set for May 8.

Santarus (SNTS) (11/20/07). 1stQT release set for May 7. Receives notice of allowance for additional U.S. patent covering Zegerid products.

Sunesis Pharmaceuticals (SNSS) (11/5/07). To report quarterly numbers on May 8. Reports data from nonclinical studies of SNS-032.

Orsus Xelent (ORS) (10/20/07). Stock price was around a $1.60 a few weeks back, but climbed nicely after company projected 2008 revenues reaching $120 million to $130 million and full-year net income growing over 50%.

Nucryst Pharma (NCST) (10/5/07). To release 1stQT numbers on May 6.

American Technology (ATCO) (10/5/07). Earnings release expected, soon. Company’s new LRAD-X AHD product line presented at homeland security event.

Wave Systems (WAVX) (9/5/07). Brokerage firm Taglich Brothers initiates coverage of stock for a fee. Showcases products at Vegas confab. Receives NASDAQ non-compliance notice.

Kodiak Oil & Gas (KOG) (9/5/07). To announce 1stQT results on May 9.

SIGA Technologies (SIGA) (8/20/07). Begins negotiations with National Institute of Allergy and Infectious Diseases (NIAID) for additional funding to accelerate ST-246 commercial scale manufacturing.

Radcom (RDCM) (7/20/07). Recent numbers not bad; balance sheet still appears to be okay.

American Fiber Optic Products (AFOP) (7/20/07). Latest quarterly report looks pretty good and AFOP is positive about outlook; balance sheet still looks good, though company did burn a lot of cash during the last quarter.

Heska (HSKA) (7/5/07). Sets earnings results for May 12.

Pharmacyclics (PCYC) (6/20/07). Receives NASDAQ minimum-bid notice. Balance sheet still looks good.

Xenonics (XNN) (6/5/07). To present at micro cap conference on May 6.

Oncolytics (ONCY) (6/5/07). Recent balance sheet still looks good. Announces Journal of Immunology publication on reovirus activation of dendritic cells; and Gene Therapy publication on reovirus treatment for melanoma.

Hana Biosciences (HNAB) (5/5/07). Sets earnings call for May 13. Regains NASDAQ compliance.

ECtel (ECTX) (5/5/07). Acquires Compwise’s assets for $1.3 million. Launches Fraudview 8.2.

Ore Pharmaceuticals (ORXE) (4/20/07). Even though latest balance sheet looks okay, we are adding this to the “Endangered List”, since the stock price has completely fallen out of bed.

Urologix (ULGX) (2/20/07). Though recent numbers not great, company is optimistic; balance sheet still looks okay. Names principal financial officer.

Eon Communications (EONC) (2/5/07). Company does a 5 to 1 reverse split, and we know what usually happens to these. Eon is now on the “Endangered List”.

Endologix (ELGX) (1/20/07). Reports 13th consecutive quarter of domestic sales growth; balance sheet still looks okay.

Neose Technologies (NTEC) (12/20/06). To hold earnings call on May 8. This is on the “Endangered List”.

Lantronix (LTRX) (12/5/06). Sets earnings news for May 8.

HealthStream (HSTM) (10/20/06). Recent numbers show growth compared to same period a year ago and company reiterates 2008 revenue growth expectations; balance sheet still seems okay.

Hydrogenics (HYGS) (9/20/06). Sets earnings call for May 6.

TVI Corp (TVIN) (9/5/06). Plans earnings news for May 7. Gets $1.75 million National Guard contract. This is on the “Endangered List”.

02Diesel (OTOD.PK) (5/20/06). Stock was bounced from the AMEX and is now trading on the Pink Sheets. This, too, is on the “Endangered List”.

TRI-S Security (TRIS) (5/5/06). Slates earnings news for May 6.

ThermoGenesis (KOOL) (4/5/06). Sets earnings release for May 7.

The Inventure Group (SNAK) (3/5/06). Recent numbers look good as does balance sheet. Roth Capital downgrades the stock. Why? Beats us.

8×8 (EGHT) (1/20/06). Packet8 virtual office business phone system now available at OfficeMax retail outlets. To present at micro cap confab on May 6.

Digital Angel (DIGA) (12/20/05). Financial results due on May 7. We have placed this on the “Endangered List”.

RAE Systems (RAE) (10/5/05). Introduces QRAE II Pump next generation confined space entry monitor. Sets earnings news for May 5.

BOS (BOSC) (1/5/05). Issues letter to shareholders. Gets supply agreement valued at about $1.5 million over two years.

Nova Measuring (NVMI) (11/5/04). Installs 100th metrology system in South Korea. Sets earnings call for May 5.

Aviza Technology (AVZA) (10/5/04). Sets earnings call for May 6. This one is on “Endangered List”.

TMNG Global (TMNG) (4/20/04). Schedules 1stQT earnings release for May 8.

OpenTV (OPTV) (3/20/04). Sets earnings release for May 6.

Our picks for this Newsletter are two biotechs, both listed on NASDAQ.

KOSAN BIOSCIENCES, INC. (NASDAQ: KOSN) – $1.66 Twelve-month hi-low has been $6.53 – $1.28. Based in Hayward, CA, with about 80 employees, this biotech has 42.6 million shares outstanding, $71.8 million in total current assets, $77.86 million in total assets, little debt, and $18.31 million in total liabilities. Institutional ownership is around 87%. Three analysts give the stock a “strong buy”, one a “moderate buy”, and two have it as a “hold”. www.kosan.com

Kosan Biosciences, Inc. is another one of those small biotechs with a healthy-looking balance sheet and some promising technologies, and it recently did a major restructuring so as to concentrate its resources on developing them. One of our main reasons for adding it to the Current Portfolio, however, is the number of analysts behind the stock.

Founded in 1995, and public for nearly seven years, Kosan bills itself as a cancer therapeutics company focusing on advancing two new classes of anti-cancer agents through clinical development: heat shock protein 90 (Hsp90) inhibitors and epothilones. Hsp90 inhibitors have a mechanism for targeting multiple pathways involved in cancer cell growth and survival. Kosan’s first and second generation Hsp90 inhibitor product candidates have demonstrated antitumor activity in multiple indications in early clinical trials. Its injectable suspension formulation of tanespimycin (KOS-953), the company’s first generation Hsp90 inhibitor and most advanced product candidate, is in Phase III clinical trial in combination with Velcade (bortezomib) for multiple myeloma, as well as in a Phase II clinical trial with Herceptin (trastuzumab) for HER 2-positive metastatic breast cancer.

Kosan claims that its epothilone drug candidates have the potential to compete in the emerging epothilone market. Epothilones inhibit cell division with a mechanism of action similar to taxanes, one of the most widely used classes of chemotherapeutic agents. The company’s compounds have been specially engineered to overcome resistance to taxanes and to have an attractive clinical profile. In mid-April, a Phase II trial of its lead epothilone drug candidate, KOS-1584, was initiated in patients with non-small cell lung cancer.

The company’s product portfolio also includes KOS-1803, a preclinical stage product for cancer; KOS-2187, a potent motilin receptor agonist that is in Phase I clinical testing for treating GERD; and KOS-2464, a preclinical stage product for cancer.

Unlike many small biotechs, Kosan does garner some revenues. During FY2007, ending 12/31/07, revenues were $22.7 million with net losses of $28.66 million.

Given the number of analysts following Kosan and the company’s balance sheet, the stock could be worth a shot.

Our 24-month target for the stock is $2.50 to $3.00.

For more information, contact KOSN at 510-732-8401; info@kosan.com

ZIOPHARM ONCOLOGY, INC. (NASDAQ: ZIOP) – $3.00. Twelve-month hi-low has been $6.50 – $2.08. Located in New York City, with about 40 employees, this biotech has 21.4 million shares outstanding, $35.52 million in total current assets, $36.72 million in total assets, little debt, and $6.4 million in total liabilities. Institutional ownership is around 21%. Two analysts rate the stock a “strong buy”. www.ziopharm.com

We recently stumbled upon Ziopharm Oncology, Inc. while visiting the Business Week site. Besides having a decent balance sheet, we thought that using arsenic as a way of killing cancer was a novel idea.

Founded in 2003, and public for less than two years, Ziopharm, simply put, is developing a portfolio of in-licensed cancer drugs, focusing primarily on cancer therapeutics which are already on the market or in development. As we said, the company is using arsenic to treat cancer, or what some call ‘arsenicals’. There are other companies trying this, but Ziopharm uses arsenic which is organic and, therefore, supposedly reduces the most toxic side effects.

Ziopharm currently has three products in clinical development: Darinaparsin (ZIO-101) is in a Phase II trial in patients with advanced myeloma, patients with primary liver cancer, and patients with diverse hematological malignancies, and a Phase I trial has also begun involving oral administration. Palifosfamide (ZIO-201) is in late Phase II clinical trials in patients with advanced sarcoma and various advanced cancers, and a Phase I/II sarcoma trial is now underway. Indibulin (ZIO-301) is currently in a late Phase I trial in Europe and the U.S., and a Phase I/II combination trial has been initiated; Indibulin is a novel synthetic anti-mitotic agent that binds to tubulin, destabilizes microtubule polymerization, arrests tumor cell growth at the G2/M phase and inhibits cell mobility and metastasis.

Like many small biotechs, Ziopharm makes no money and shows a lot of losses. For example, in the 4thQT of FY2007, ending 12/31/07, revenue was zero and losses were $7.7 million.

The medical community has tried a lot of things to combat many forms of cancer. Why not arsenic? If it works……….?

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

For more information, contact ZIOP’s Suzanne McKenna at 646-214-0703; smckenna@ziopharm.com

Look for the May 20, 2008 Newsletter to be posted on May 19 or May 20.

Thank you,

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