NOVATEL WIRELESS, INC. & pSIVIDA CORPORATION

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Hello Readers,

This is no way to run an economy and it is definitely no way to run a country. Worst yet, it is no way to run the markets, and, therein is the problem. Markets are not to be “run” or manipulated. They should be allowed to free range. However, every time the markets attempt to find their true values, which are probably lower, some central banker, or their spokesperson alludes to more quantitative easing. Of course, this occurs during major market sell offs and these pronouncements have been leading to sugar rushes, which have created artificially-priced stocks. Can anyone say with a straight face that any stock in the S&P 500 is priced at its fundamentals? We doubt it.

Our major fear from all of this red cape waving is that the day will come when the central bankers are no longer believable and that their arsenals are shooting blanks. When that day comes, which we believe will be soon, put on the body armor.

Because of the dismal market performance during much of July’s last half, we did not close any positions in the Current Portfolio.

Here are the headlines since the last Newsletter about companies in the Current Portfolio; dates in parentheses are when we first recommended them. We are not giving updates about companies on the “Endangered List” unless we feel the news to be highly significant.

Overland Storage (OVRL)(7/20/12). IBM and Dell products from BDT found guilty of infringing on company’s storage partitioning patent, which helped to juice the stock.

Metabolix (MBLX)(7/5/12). Gets upgraded by Ardour Capital. Recent balance sheet still looks strong. Signs letter of intent with Antibioticos for production of Mirel biopolymer resin. To webcast at the Jefferies global conference on August 8.

Athersys (ATHX)(7/5/12). Receives Orphan Drug Designation by FDA for MultiStem in Hurler’s Syndrome.

Vermillion (VRML)(6/20/12). Announces positive top-line results from the OVA500 multi-center study led by UC Irvine. Sets earnings call for August 14.

Capstone Turbine (CPST)(5/20/12). To announce earnings on August 9.

Bacterin International Holdings (BONE)(5/5/12). Sets earnings call for August 9.

Five Star Quality Care (FVE)(5/5/12). Earnings call set for August 1, the day we post this Newsletter.

Zogenix (ZGNX)(4/20/12). Company and Battelle launch “Less is More” DosePro marketing campaign. Plans $60 million secondary offering, which may put pressure on stock price. Announces FDA acceptance for review of Zohydro ER NDA for treating chronic pain. Sets earnings call for August 8.

Mattson Technology (MTSN)(4/5/12). Quarterly numbers disappoint; balance sheet still looks good. Receives order for paradigmE Etch System for foundry production. Introduces new Helios XL for advanced logic device manufacturing.

Ballard Power Systems (BLDP)(3/20/12). Buys fuel cell maker Ida Tech.

Complete Genomics (GNOM)(2/20/12). To bundle ingenuity analysis and interpretation software with whole genome sequencing.

Geron Corporation (GERN)(2/5/12). Balance sheet still looks pretty strong.

Anadigics (ANAD)(11/20/11). Quarterly numbers not great; balance sheet still looks strong. Company powers Samsung Galaxy S III. Needham downgrades company.

ECOtality (ECTY)(11/5/11). Partners with Volkswagen Group to install Blink DC fast charger in Northern California.

Synthesis Energy Systems (SYMX)(8/20/11). Commissioning begins at SYMX’s Yima joint venture project in China.

Cover-All Technologies (COVR)(7/20/11). Business Intelligence now available on iPad. Universal Group to upgrade to the new COVR policy platform for commercial lines underwriting and rating.

On Track Innovations (OTIV)(6/20/11). Signs a strategic cooperation agreement with Wright Express. Gives an update on the T-Mobile lawsuit.

Neostem (NBS)(5/20/11). Subsidiary Progenitor Cell Therapy and SOTIO enter into a Phase 3 manufacturing services agreement.

Jamba, Inc. (JMBA)(3/20/11). Reschedules earnings release to August 1, the day we post this Newsletter. Opens 21st airport location.

Oculus Innovative Sciences (OCLS)(3/5/11). Sets earnings release for August 2, the day after we post this Newsletter.

Real Goods Solar (RSOL)(1/20/11). To present at the 2012 Gateway Conference on September 6. Partners with Gestamp Solar for 4.8 megawatts of renewable energy in Vermont. Names new CEO.

Great Basin Gold (GBG)(1/5/11). Even though this company may be around for a long time, we are placing it on the “Endangered List”. There once was a time when funds would eat up junior mining stocks, but those days are now rare. The funds, namely ETFs are mostly buying the actual metal.

Sprint Nextel (S)(1/5/11). The usual several dozen news releases and articles. The stock got a huge boost when CNBC’s Jim Cramer gave the stock a strong on-air “buy”.

Astex Pharmaceuticals(ASTX)(12/5/10). Quarterly numbers look okay and balance sheet still appears to be strong. Dacogen receives EU panel recommendation for approval.

Pixelworks (PXLW)(11/20/10). Quarterly numbers so-so; balance sheet still looks good. Announces production shipments of its Topaz SoC family of advanced display processors for next generation projectors and video applications.

Inovio Pharmaceuticals (INO)(10/20/10). To present at the 2012 Gateway Conference on September 6. And will webcast at the RetailInvestorConferences.com on August 2, the day after we post this Newsletter.

Novavax (NVAX)(4/5/10). To report earnings on August 3. Delays testing on flu vaccine. Partners with PATH on RSV vaccine. Will help develop new malaria vaccine.

Qualstar (QBAK)(10/20/09). Says it is exiting the touchless mouse and touchless pointing technology market. Announces Encryption Key Management for XLS enterprise tape libraries.

Performance Technologies (PTIX)(7/20/09). To release earnings on August 2, the day after we post this Newsletter.

GlobalScape (GSB)(5/20/08). Earnings news set for August 9. Secures Army software contract extension.

Our picks for this Newsletter are a mobile communications provider and another one of those small biotechs, both NASDAQ-listed.

NOVATEL WIRELESS, INC. (NASDAQ: NVTL) – $2.36. Twelve-month hi-low has been $5.47 – $1.95. Located in San Diego, CA, with about 480 employees, this mobile communications provider has 32.4 million shares outstanding, $153.12 million in total current assets, $213.36 million in total assets, little debt, and $83.62 million in total liabilities. Institutional ownership is around 66%. One analyst rates the stock a “strong buy”, five as a “hold”, and one as “underperform”. www.novatelwireless.com

About a dozen years ago, Novatel Wireless, Inc. was a market darling; at one point, trading at nearly $225 a share. Of course, since then, the company has seen better days. However, Novatel has a strong balance sheet and revenues appear to be stabilizing. It is also trading at the low end of the 52-week range and may be due for a run.

Founded in 1996, and public for over twelve years, Novatel provides wireless broadband access solutions for the mobile communications market. The company offers a slew of products such as MiFi Intelligent Mobile Hotspots, which provide connectivity options for Wi-Fi enabled devices like the iPad, Kindle, tablets, PCs, MP3 players, and gaming devices; USB and PC-card modems for wireless access; and embedded modules for use in laptops, netbooks, tablets, and other electronic products to provide wireless broadband access. It also offers MobiLink mobile communications software suite, an object-oriented application that enables access to connectivity features, such as SMS, multimedia messaging, and virtual private networking, as well as providing video telephony and wireless local area networks management capabilities; and MiFi DLNA server, which operates on MiFi hotspots and allows users to access and play movies, music, and photos.

Novatel also provides Spider MT, SA, and AT integrated solutions and accessories for monitoring and managing mobile and fixed assets, vehicle tracking and telemetric, and workforce tracking management; Enabler III and HS embedded solutions; and N4A software and design services. Besides OEMs, its customer base includes wireless operators and other wireless market participants, such as Bell Mobility, Sprint PCS, Telefonica, Verizon Wireless, Virgin Mobile, Vodafone and OEM partners such as Dell.

In early July, the company was granted a key patent covering wireless gateway architecture including Intelligent Mobile Hotspot products. Novatel currently holds 45 issued or allowed U.S. patents and 58 filed patent applications.

For FY2011, ending 12/30/11, revenue was $402.86 million with $24.89 million in net losses compared to FY2010 revenue of $338.94 million and $33.34 million. During the 1stQT of the current FY, ending 3/30/12, revenue was $100.15 million with $37.92 million in losses, which seems to be a one-time yearly charge.

While it is doubtful that Novatel will ever be the behemoth it once was, we feel there is still a lot of life left in it. We may get a better inkling on August 7 when it releases 2ndQT earnings.

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

For more information, contact NVTL’s William Walkowiak at 858-431-3711; ir@nvtl.com

pSIVIDA CORPORATION (NASDAQ: PSDV) – $2.75. Twelve-month hi-low has been $5.10 – $1.02. Located in Watertown, MA, with about 25 employees, this biotech has 20.8 million shares outstanding, $17.89 million in total current assets, $22.83 million in total assets, little debt, and $7.28 million in total liabilities. Institutional ownership is around 15%. One analyst rates the stock a “buy” and one as a “hold”. www.psivida.com

And yes, there is a small “p” in front of pSivida Corporation. Here is another one of those small R&D biotechs that has a good balance sheet and some promising products in the hopper. Any positive development could give the stock a nice bounce.

Founded in 1987, and public for over seven years, pSivida develops drug delivery products for treating back-of-the-eye diseases utilizing its Durasert technology system. The company’s lead product candidate is lluvien, which is in Phase III clinical trials and delivers fluocinolone acetonide (FA) for treating diabetic macular edema (DME), a cause for vision loss. It is also conducting Phase II clinical trials with lluvien for treating wet and dry forms of age-related macular degeneration, and retinal vein occlusion. In addition, the company’s products include Retisert for treating posterior uveitis, an autoimmune condition characterized by inflammation of the posterior of the eye that can cause sudden or gradual vision loss; and Vitrasert for cytomegalovirus retinitis; a blinding eye disease that occurs with advanced AIDS.

pSivida is also developing the Latanoprost product, an injectable, bio erodible drug delivery implant in Phase I/II dose-escalating study for treating glaucoma and ocular hypertension; the Posterior Uvetis product candidate in a Phase I/II study for treating posterior uveitis; BioSilicon technology system, which is a nano-structured porous silicon for use as a drug delivery platform and to deliver smaller molecules; and Tethadur, which uses BioSilicon to deliver large biologic molecules, including peptides and proteins.

Late last month, Germany granted authorization to market Iluvien for the treatment of Chronic Diabetic Macular Edema.

The company has strategic alliances with Bausch and Lomb, Alimera Sciences, Pfizer, and Intrinsiq Materials.

Typical of small R&D’s, the company chalks up a lot more losses than revenues, i.e. for the quarter ending 3/30/12, revenue was $538,000 with $2.69 million in losses.

The company appears to have a lot happening and we like with whom they have alliances.

Our 24-month target for the stock is $4.50 to $5.00

For more information, contact PSDV’s Brian Leedman at +61(0)412 281 780; brianl@psivida.com

Look for the August 20, 2012 Newsletter to be posted on 8/16 or 8/17.

Thank you,

George