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Dear Reader,

Since the last Newsletter, we have closed another three positions; two for gains and one for a loss.

OXiGENE (9/20/01). Closed position 5/27/03 at $4.58 for a 64% GAIN.

DIGITAL THINK (4/5/02). Closed position 5/19/03 at $3.53 for a 57% GAIN.

U.S. GOLD (9/20/97). Closed position 5/19/03 at 55¢ for a 45% LOSS.

A few weeks ago, OXiGENE was at $2.11, and, then, POW!, the company reported positive results on its anticancer compound and bagged a partnership with a U.K. research outfit. DigitalThink had been showing steady up-movement since April on good financial news and analysts rankings. As for U.S. Gold, we had been anxious to close this one for some time, and, after what seems like a billion years sitting in the Portfolio, it was time to say adios.

Okay, hit the replay button, again. As we have been stressing for the last several months, this market is at the start of a major upturn, and for all of the reasons we have been harping on. Now, add the tax cut and the markets will be juiced even more. However, remember that this all could come to a sudden halt due to terrorists, SARS, etc. Also, don’t be alarmed by some lopsided down days, which will seem scary; these will be periodic consolidations.

The Russell 2000 hit 440, and our Current Portfolio, as we mentioned in the last issue, looks much much better than it did at the beginning of the year.

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

New York Health Care (BBAL) (3/20/97). Yes, this is now the oldest position in the Portfolio, and, if it doesn’t start a break out over the next few moths, we’ll close it – promise. Reported 1st QT results, and balance sheet looks pretty good. Israeli researchers give positive marks to company’s Probiotic formulation.

Draxis Health (DRAX) (3/20/00). Reports 1st QT earnings. Balance sheet looks sort of okay as company makes a small dent in its debt.

DOR BioPharma (DOR) (9/20/00). Issued patent for Recombinant Ricin A chain mutant. We still keep this one on the “Endangered List”, but things appear to be looking up.

Genetronics (GEB) (10/5/00). Another one on the “Endangered List” that we still hold a glimmer of hope for. Announces pact with Genteric to deliver DNA into the salivary gland. Company still had $2.35 million cash/equivalents as of 3/31/03.

InSite Vision (ISV) (4/20/01). Signs term sheet to raise $1.5 million for interim financing. On “Endangered List”.

Arotech (ARTX) (6/5/01). Ships record number of batteries to U.S. Forces in Iraq. V.A. Police using some of company’s solutions.

Abraxas Petroleum (ABP) (10/5/01). Extends exchange offer.

Access Pharmaceuticals (AKC) (11/5/01). Announces positive data from clinical trial results of OraDisc. NDA to be filed.

Saba Software (SABA) (11/20/01). Introduces its next generation enterprise learning suite. We had to put this on the “Endangered List” in the last issue because of the reverse stock split.

Orthovita (VITA) (12/20/01). Completes patient enrollment in pilot study of CORTOSS.

Airspan Networks (AIRN) (1/20/02). Launches upgraded WipLL software tools.

Epoch Biosciences (EBIO) (1/20/02). Sells specialty oligonucleotide business.

Magic Software (MGIC) (3/20/02). Parent company releases good-looking 1st QT report. MGIC forms worldwide strategic alliance with Pervasive Software.

Exegenics (EXEG) (5/5/02). We’ll be closing this one, soon. A tender offer of 40¢ a share was made for the company, but the stock has gone up to 60¢. Are they expecting a better offer? We don’t know what’s going on, so, when in doubt, punt.

Nanogen (NGEN) (5/20/02). The stock is up almost $1.20 since the last issue on news of receiving another patent, bringing their total to 52.

Optibase (OBAS) (5/20/02). BBC selects OBAS for advanced monitoring system.

Immersion (IMMR) (6/5/02). Launches new procedure for endoscopy simulator.

Hemispherx (HEB) (7/5/02). Files patent applications to combat SARS. SEC makes inquiry over acquisition of Interferon Sciences. Accelerates manufacture of Alferon N. NIH looks at Ampligen as an anti-SARS drug candidate.

Rigel Pharmaceuticals (RIGL) (7/20/02). Will present at three different biotech conferences over the next week.

Generex (GNBT) (8/5/02). Raises $3.2 million through private placement. Gets okay to commence Canadian trials for Oralin. Ends diabetes collaboration with Lilly. Enters into R&D pact with Antigen Express to develop SARS vaccine.

Harvard Bioscience (HBIO) (10/20/02). Loses $1.45 million suit to Affymetrix; company may appeal.

Viewpoint(VWPT) (11/20/02). Even though this is still on “Endangered List”, we’re starting to feel better about it. Scion chooses Viewpoint for customizable online vehicle presentation.

Titan Pharmaceuticals (TTP) (11/20/02). New top analysts rankings. Also, mentioned in a story about companies that could potentially go private.

Interactive Intelligence (ININ) (12/5/02). Several releases about software evaluation and distributorships.

LogicVision (LGVN) (12/20/02). Names Spirox exclusive distributor in Taiwan, China, and Singapore. Enters partnership program with JTAG.

Interwoven (IWOV) (3/20/03). Again wins WebSphere Advisors’ Choice Award. JMP downgrades stock. Gets high marks from Baltimore public school system.

Concurrent Computer (CCUR) (4/5/03). Announces version 1.3 of its popular RedHawk Linux real-time operating system.

Cyro-Cell (CCELE) (5/5/03). Ernst &Young resigns as auditor, but, once again, stock price still appears to be withstanding bad news.

MIPS Technologies (MIPS) (5/20/03). Announces restructuring plan, which was somewhat expected, and could be beneficial.

Our picks for this Newsletter are a basic manufacturer, which may be a nice change of pace, and another biotech.

MAGNETEK, INC. (NYSE: MAG) – $2.25. Twelve-month hi-low has been $12 – $1.90. Based in LA, CA, with about 1800 employees, this industrial equipment maker has 23.5 million shares outstanding, $103.3 million in total current assets, $270.3 million in total assets, of which $62 million is goodwill, $55 million in total current liabilities, and $90.5 million in long-term debt/other long-term obligations. Institutional ownership is around 78%. One analyst has the stock as a “moderate buy” and two have it on “hold”.

We thought maybe it was time to stray a little from the slew of hi-tech/biotech stocks that dominate our Current Portfolio and take a stab at a basic manufacturer. Although its balance sheet could be better, Magnetek, Inc. has had some recent developments that could get it back on track.

Founded in 1984, through the acquisition of Litton Industries’ Magnetics Group, Magnetek, over the last few years, has shed nearly everything anchored in the old world of analog power supplies, so that, today, it is a pure play in digital power supply manufacturing. It also engineers, furnishes, and installs power systems for telecom service providers.

With five manufacturing plants in North America and two in Europe, and operating through three divisions, Magnetek makes power control products such as AC/DC switching power supplies, AC-to-DC battery chargers, and rectifiers used in computers, telecom equipment and office machines. It also manufactures voltage regulators used in distributed power generators, and makes programmable motion control and power conditioning systems. MAG’s products include variable-frequency motor drives used in materials handling and industrial automation equipment, air conditioning and heating equipment, and overhead cranes.

In April, Magnetek entered into a contract with ProSoft Ltd., a Russian distributor of industrial equipment and components, that will represent MAG’s Power Electronics Group throughout most of what had been the USSR. Last month, MAG introduced a “brake-by-wire” system for use in material handling, which is similar to technology being considered for “drive-by-wire” motor vehicles.

For FY2002, ending 6/30/02, revenue was $188.2 million with a net income of $1.4 million. During the first nine months of FY2003, ending 3/31/03, revenue was $147.3 million with $29.86 million in net losses, with much of this blamed on slower U.S. and European economies. However, at the end of March, MAG’s order backlog stood at $54.3 million versus $48.4 million for the previous quarter.

Magnetek is in the early stages after its transformation from analog to digital. It will probably need some time, and a better economy, to get “legs”.

Our 24-month target for the stock is $4.00 to $5.00.

For more information, contact MAG’s Robert Murray at 615-316-5270;

SEQUENOM, INC. (NASDAQ: SQNM) – $2.65. Twelve-month hi-low has been $5.15 – $1.25. Located in San Diego, CA, with about 210 employees, this biotech has 39.4 million shares outstanding, $91.9 million in cash/equivalents, $143.9 million in total assets, and $40.54 million in total liabilities, of which $9.4 million in long-term debt. Institutional ownership is around 20%. One analyst rates the stock a “strong buy” and another two as a “hold”.

Yup, we add another biotech to the Portfolio, and like many of the others, Sequenom, Inc. has some pretty nifty technologies and a healthy-looking balance sheet. In fact, the CFO recently said the company believes it has adequate cash to take it through 2005, or for two and a half more years.

Founded in 1994, and public since February, 2000, when the stock IPOed at around $120/share, Sequenom bills itself as a leading high-performance DNA analysis company that is organized into two distinct business units, which combine to capitalize on the company’s Mass ARRAY system, SNP assay portfolio, disease gene discovery programs, and extensive DNA sample repository.

Through its Genetic Systems unit, Sequenom sheds light on the genetic underpinnings of life with the MassARRAY sequencing system that analyzes variations in DNA called single nucleotide polymorphisms (SNPs). The company claims this system is the most powerful high-performance DNA analysis platform in the industry. Clients include Incyte Genomics and GlaxoSmithKline, with which it is creating a SNP assay for use in pharmacogenomics. Other leading customers are The Whitehead Institute, The Sanger Centre, and the NIH.

Its Pharmaceuticals Division discovers the genetic causes of diseases and uses the information to develop drug candidates it plans to license to other firms or develop in-house.

A few months ago, Sequenom entered into a research collaboration with Isis Pharmaceuticals to discover potential SNPs, the most common form of genetic variation, within Isis’ antisense drug target regions. Also, in April, researchers at Oxford and Harvard developed a new MassARRAY-based application for measuring allele-specific protein-DNA applications.

For FY2002, ending 12/31/02, revenue was $30.88 million with $205.7 million in losses. During the 1stQT of FY03, ending 3/31/03, revenue was $7.44 million with $8.54 million in losses. FY2002 numbers were exceptionally ugly due to certain items that had to be “restated”.

Sequenom’s technology seems to have caught the attention of some pretty hefty biotech heavyweights, and the company appears to be well-funded.

Our 20-month target for the stock is $5.50 to $6.00.

For more information, contact SQNM’s Mark Henshaw at 858-202-9000;

Look for the June 20, 2003 issue to be posted on 6/16 or 6/17.

Thank you,

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