MICROVISION, INC. & GLOBALSCAPE, INC.

Hello Readers,

Since the last Newsletter, we have closed five positions; three for gains and two for losses.

IOMAI CORPORATION (8/20/07). Closed position 5/13/08 at $6.30 for a 260% GAIN.

NETSOL TECHNOLOGIES (3/5/08). Closed position 5/13/08 at $3.02 for a 54% GAIN.

GSI TECHNOLOGY (2/5/08). Closed position 5/12/08 at $4.40 for a 76% GAIN.

OPEN TV (3/20/04). Closed position 5/12/08 at $1.62 for a 42% LOSS.

PALATIN (4/5/04). Closed position 5/12/08 at 27 cents for a 93% LOSS.

At the beginning of the year, Iomai dropped to under a dollar, but started taking off in April thanks to a few government contracts and a deal with Merck; and then, out of the blue came news that Intercell was acquiring the company for $6.60 a share. This doesn’t happen too often, but, when it does, it’s sweet. NetSol popped on decent earnings numbers. Ever since we picked it in February. GSI has behaved well, and on May 9, the brokerage firm Needham flashed a “buy” on the stock, which really juiced it. We finally closed OpenTV and Palatin, our two oldest positions, for losses.

Despite some ‘minor victories’ with our Current Portfolio, we are still negative on the markets. If you review our Newsletters of the last eight or nine months, you will know why. Our biggest beef over the last few months has been how the Fed is artificially propping up the markets. No real rally or new bull market can really get legs until we have a major blow-off and cleansing. Yes, that sounds perverse, but that is how reincarnations begin. But, there is good news. Over the last several weeks, small caps have been outperforming the rest of the market, for the most part.

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

Kosan Biosciences (KOSN) (5/5/08). Balance sheet still seems healthy. Announces data presentations at ASCO 2008 annual meeting.

Ziopharm Oncology (ZIOP) (5/5/08). Receives notice of allowance for two U.S. patent applications covering Darinaparsin. To present at Rodman and Renshaw confab on May 19. Releases 1stQT results. Receives FDA Orphan Drug designation for Palifosfamide (ZIO-201) in treating soft tissue sarcoma.

Micromet (MITI) (4/20/08). Quarterly results look upbeat; balance sheet still looks good.

Kopin (KOPN) (4/20/08). 1stQT numbers blow past same quarter from a year ago; balance sheet still looks very strong. Gets NASA solar cell development contract.

Replidyne (RDYN) (4/5/08). Latest balance sheet looks very healthy.

Biolase (BLTI) (4/5/08). Reports 26% year-over-year sales increase and breakeven net income for 1stQT; balance sheet still looks good.

Rodman and Renshaw (RODM) (3/20/08). Recent numbers look better than previous quarter; balance sheet still seems okay. Plans to acquire energy investment bank COSCO Capital.

ActivIdentity (ACTI) (3/5/08). Quarterly numbers skewered due to $42.5 million accounting charge; balance sheet still seems strong.

Entrust (ENTU) (2/20/08). Partners with Hewlett Packard to deploy Taiwanese ePassports, authenticate biometric data.

Amicas (AMCS) (1/20/08). Highlights radiology automation solutions at RBMA 2008.

Hollywood Media (HOLL) (1/5/08). Quarterly revenues up over previous quarter, but losses widen slightly; balance sheet still looks good.

Move, Inc. (MOVE) (1/5/08). Revenue higher than a year ago, but losses aren’t good; balance sheet still looks very strong. Brokerage firm downgrades the stock to a “hold”.

Hollis-Eden Pharma (HEPH) (12/20/07). Updates clinical development programs. Quarterly cash position still looks good.

Amerityre (AMTY) (12/5/07). Initiates commercial production of solid polyurethane elastomer tires.

Santarus (SNTS) (11/20/07). 1stQT revenues up 29% and net loss reduced 54% from prior year period, however, company slightly downgrades 2008 expectations; balance sheet still looks okay.

Continucare (CNU) (11/20/07). Recent numbers look pretty good, as does balance sheet.

Linktone (LTON) (11/5/07). Slates earnings call for May 22.

Sunesis Pharma (SNSS) (11/5/07). To present at Rodman and Renshaw healthcare confab on May 19. Recent balance sheet still looks good.

Retractable Technologies (RVP) (10/20/07). Latest numbers not that great; balance sheet still looks strong.

Orsus Xelent (ORS) (10/20/07). Comes out with pretty good revenue numbers for the last quarter and reiterates full-year guidance for more than 50% growth in net income on anticipated sales growth of more than 30%.

Nucryst Pharma (NCST) (10/5/07). Latest balance sheet still looks good.

American Technology (ATCO) (10/5/07). New product launches expected to juice future revenues as company releases latest numbers; balance sheet still looks okay.

XATA (XATA) (9/20/07). Quarterly numbers look okay as does balance sheet.

Wave Systems (WAVX) (9/5/07). Releases some pretty good revenue numbers for quarter but losses are still a problem as balance sheet weakens. Receives minimum bid notice from NASDAQ.

Kodiak Oil & Gas (KOG) (9/5/07). Quarterly numbers so-so but company is optimistic about its leases; balance sheet still looks okay. Names new CFO.

SIGA Technologies (SIGA) (8/20/07). Recent balance sheet so-so. Albemarle optimizes smallpox drug candidate for SIGA.

A.P. Pharma (APPA) (8/5/07). Recent balance sheet still looks good.

Radcom (RDCM) (7/20/07). Approves one-for-four reverse stock split, which, as we have said for years, these seldom work for current shareholders. Of course, the company probably feels it needs to this to maintain NASDAQ listing.

Heska (HSKA) (7/5/07). Quarterly numbers so-so; balance sheet still looks okay.

Pharmacyclics (PCYC) (6/20/07). RWD Acquisition begins cash tender offer to purchase up to 4 million shares at $1.05 per share.

Xenonics (XNN) (6/5/07). Releases some pretty good quarterly numbers; balance sheet still looks viable.

Oncolytics Biotech (ONCY) (6/5/07). Announces UK Phase II clinical trial investigating REOLYSIN in combination with Paclitaxel and Carboplatin. Starts patient enrolment in UK combination REOLYSIN Cyclophosphamide trial.

Encorium (ENCO) (5/20/07). Although quarterly numbers disappoint, company optimistic about future due to backlogs; balance sheet still seems okay. Names new CFO.

Hana Biosciences (HNAB) (5/5/07). Recent balance sheet still looks okay but company burned a lot of cash last quarter. To present at Rodman and Renshaw confab on May 19.

ECTel (ECTX) (5/5/07). Posts okay quarterly numbers; balance sheet still looks good.

VocalTec (VOCL) (4/20/07). To exhibit at world VoIP Africa 2008. We’re putting this one on the “Endangered List”.

TTI Team Telecom (TTIL) (3/5/07). Reports decent quarterly numbers; balance sheet still looks pretty good.

Urologix (ULGX) (2/20/07). Receives minimum bid notice from NASDAQ.

UQM Technologies (UQM) (2/5/07). To present at JMP Securities confab on May 19. ZeroTruck powered by UQM system debuts at Las Vegas expo. Introduces 125 kW propulsion system. UQM electric motor turns the propeller as Boeing successfully completes world’s first flight of a manned fuel cell powered airplane.

Endologix (ELGX) (1/20/07). Names new president/CEO.

Neose Technologies (NTEC) (12/20/06). Recent balance sheet looks okay. This is on the “Endangered List”.

Cardiotech (CTE) (12/20/06). Receives approval for a second graft size for CardioPass clinical trial.

Lantronix (LTRX) (12/5/06). Recent quarterly numbers not bad; balance sheet still looks good. ManageLinx earns eg3.com’s 2008 Editor’s Choice Award.

Proxim Wireless (PRXM) (11/5/06). Recent numbers not good as company says this is a ‘transitional period’; balance sheet still looks okay. This is making us nervous – wait and see. Enables enhanced security at Port de La Rochelle in France.

Hydrogenics (HYGS) (9/20/06). Recent quarterly report pretty upbeat as company reports $29 million backlog; balance sheet still looks good.

TVI Corp (TVIN) (9/5/06). Recent numbers look lousy as does balance sheet. This one is on the “Endangered List”.

NTN Buzztime (NTN) (7/5/06). Recent numbers so-so; balance sheet still looks good. Company claims current quarter will see positive results due to turnaround.

TRI-S Security (TRIS) (5/5/06). Good revenue numbers overshadowed by big loss due to certain charges; balance sheet not looking real good.

Pharmos (PARS) (4/20/06). Reports 1stQT numbers. To present at the Rodman & Renshaw healthcare confab on May 19. This is on the “Endangered List”.

Thermogenesis (KOOL) (4/5/06). Recent numbers about average for the company, but it needs to work on the losses; balance sheet still looks healthy. Announces amended and restated distribution agreement with GE Healthcare.

TII Network (TIII) (3/20/06). Recent numbers showing modest revenue growth and some profits; balance sheet okay but cash position could be better.

The Inventure Group (SNAK) (3/5/06). Names new CEO.

Lipid Sciences (LIPD) (2/20/06). Presents atherosclerosis regression data at EuroPCR 2008 Congress. Broadens intellectual property portfolio with two new patents. Balance sheet keeps getting weaker. This one is making us antsy.

Adherex (ADH) (2/20/06). Latest balance sheet looks good. Announces publication of ADH-1 study in Cancer Research Magazine. Announces agreement for STS Phase III data. This is on the “Endangered List”.

MIND C.T.I. (MNDO) (2/5/06). 1stQT preliminary unaudited results not great, but company optimistic because of backlog.

8×8 (EGHT) (1/20/06). Slates earnings call for May 21. Announces lower international calling rates and new virtual numbers in Mexico. Packet8 Virtual Office business phone system now available at OfficeMax retail outlets.

Digital Angel (DIGA) (12/20/05). Posts quarterly numbers. This is on the “Endangered List”.

Westell (WSTL) (10/20/05). Schedules earnings call for May 22.

RAE Systems (RAE) (10/5/05). Quarterly numbers off compared to same period last year; balance sheet still looks good.

EntreMed (ENMD) (9/5/05). To present at Rodman and Renshaw confab on May 19. Dana-Ferber Cancer Institute commences Phase 1 trial with ENMD’s selective kinase inhibitor. Recent balance sheet looks okay as long-term debt comes down a little.

Zi Corp (ZICA) (8/5/05). Releases quarterly numbers. This is on the “Endangered List”.

Vion Pharma (VION) (5/20/05). Several releases including latest financials. This, too, is on the “Endangered List”.

B.O.S. (BOSC) (1/5/05). Earnings call set for May 22.

Nova Measuring (NVMI) (11/5/04). Quarterly revenue numbers could be better; balance sheet still looks good.

Aviza Technology (AVZA) (10/5/04). Releases quarterly report. This is on “Endangered List”.

Network Engines (NENG) (6/5/04). Latest quarterly numbers look decent, as does balance sheet. Signs distribution agreement with RadiSys to deliver best-in-class ATCA solutions.

TMNG Global(TMNG) (4/20/04). Quarterly report looks good, thanks mainly to revenue from acquisitions; balance sheet still looks decent.

Our picks for this Newsletter are an electronics maker trading on NASDAQ and an AMEX-listed service provider.

MICROVISION, INC. (NASDAQ: MVIS) – $3.85. Twelve-month hi-low has been $6.08 – $1.82. Based in Redmond, WA, with about 150 employees, this electronics maker has 56.7 million shares outstanding, $33.75 million in total current assets, $39.19 million in total assets, little debt, and $10.1 million in total liabilities. Institutional ownership is around 16%. Three analysts rate the stock a “strong buy”. www.microvision.com

With a small handful of analysts giving the stock a “strong buy” and its good-looking balance sheet, plus recently expanding its supply chain, it seems like Microvision, Inc. is one to add to the Current Portfolio.

Founded in 1993, and public for nearly seven years, Microvision develops miniature display and imaging engines based upon its integrated photonics module (IPM) technology platform, or, more simply put, the company makes light scanning technologies. The IPM uses two dimensional micro-electrical mechanical system (MEMS) light scanning technologies, lasers, optics, and electronics to create video or small image from a small form factor. It principally offers Flic Scanner, or ROV Scanner, a hand-held bar code scanner and bar code scanner enabled enterprise solutions. Microvision is named in the top 20 electronics companies worldwide in patent pipeline power, according to the second annual IEEE Spectrum survey.

Microvision’s proprietary display engine is called PicoP, which is an ultra-miniature projector capable of producing large, high contrast, color rich, high resolution images. PicoP is small and low-power enough to be embedded directly into mobile devices, such as cell phones.

Last month, Microvision signed a master distribution agreement with Brightpoint for the ROV Scanner. The agreement was accompanied by an initial purchase order. Brightpoint is a large distributor of wireless devices and handled roughly 83 million mobile devices last year to such customers as Nokia, Motorola, AT&T, Sprint, HTC, Cingular, and Verizon. At the end of the first quarter, Microvision delivered a prototype instrument cluster display based on the PicoP engine to one of its global Tier 1 automotive customers. It also, recently, delivered advanced prototypes of a helmet mounted display to General Dynamics under the Mounted Warrior contract.

For FY2007, ending 12/31/07, revenue was $10.48 million with $19.8 million in losses (ouch!). During the 1stQT of the current FY, ending 3/31/08, revenue was $2.57 million with $5.1 million in losses (another ouch!).

Yes, the losses are tough to swallow, but the company seems to be moving in the right direction, i.e. the Brightpoint pact.

Our 24-month target for the stock is $5.75 – $6.50.

For more information, contact MVIS’s Tiffany Bradford at 425-936-6847; ir@microvision.com

GLOBALSCAPE, INC. (AMEX: GSB) – $2.35. Twelve-month hi-low has been $7.71 – $1.60. Located in San Antonio, TX, with about 65 employees, this service provider has 17.2 million shares outstanding, $7.26 million in total current assets, $17.8 million in total assets, little debt, and $3.73 million in total liabilities. Institutional ownership is around 20%. www.globalscape.com

Here’s one with not only a nice balance sheet, GlobalScape, Inc. also has shown good revenue and profit growth over the last few years. We suspect the stock has been pounded along with many other small stocks, or a case of throwing out the baby with the bath water.

Founded in 1996, and public for less than a year, GlobalScape develops and distributes secure managed file transfer (MFT) software for individuals and business users to safely send files over the Internet. The company offers file transfer protocol (FTP) client programs, including CuteFTP, which permits corporate IT professionals and individuals to request a file from or send a file to an FTP server or host computer; and CuteFTP Pro, a program that incorporates encrypted transfers using SSL, HTTP, and SSH2, as well as S/KEY password encryption. It also provides file transfer servers, such as Secure FTP Server, which enables encrypted transfers as well as facilitates system administrators to create, sign, import, export, and add digital certificates; and Enhanced File Transfer Server, an enterprise file server to provide digital certificate management, multiple secure protocols, remote administration, authentication choices, and automation and advanced security options.

GlobalScape also offers data replication products that consist of Wide Area File System, which delivers a file access system, instant file-sharing, and server-to-server mirroring; continuous backup software that delivers real-time continuous data protection; and Enterprise products for WAFS or multi-directional mirroring and real-time backup. The company’s products are used by technology, banking, healthcare, and government entities.

For FY2007, ending 12/31/07, revenue was $18.36 million with $3.92 in net income compared to 2006 revenue of $10.97 million and $1.96 million in net income. It should be noted that in FY2007, the Army Contracting Agency ITEC4 purchases accounted for over 14% of sales. During the 1stQT of the current FY, ending 3/31/08, revenue was $4.05 million with $175,000 in net income; net income during this quarter was down compared to the same period last year, but revenue was higher.

GlobalScape has shown growth and profits, and, if this continues, the stock price, at some point, should reflect this.

Our 24-month target for the stock is $3.75 to $4.00.

For more information contact GSB’s Earl Posey at 210-293-7918.

Look for the June 5, 2008 Newsletter to be posted on June 2 or June 3.

Have a safe holiday,
George

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