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Since the last Newsletter, we closed two more positions; one for a gain and the other for a loss.

ENERGY RECOVERY (5/5/11). Closed position 2/25/13 at $4.83 for a 57% GAIN.

AMERICAN CARESOURCE (4/20/10). Closed position 2/25/13 at $1.90 for a 67% LOSS.

No real news seemed to drive Energy Recovery except that the company seems to fit Obama’s energy mix, whatever that is, and we are glad to finally see the stock pierce our 50%-plus ceiling. And we closed American Caresource for a loss.

Despite the $85 billion a month the Fed is pumping into the economy, the markets seem to want an excuse for some profit taking, and Italy and Sequestration appear to be the excuses for doing so. The question is that if there is a sell-off, how deep will it be? We suspect that it won’t be very severe for the simple reason that investors have tired of receiving only 1%, if that, on their fixed financial instruments. As we have said repeatedly, this is no way to run an economy. At some point, the economic mavens will conclude that higher rates can be a good thing.

Our Current Portfolio was making some headway until the recent market stumble, but this is something we have lived with over the last few years – two steps forward and one and a half back.

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.

AlphaTec Holdings (ATEC)(2/20/13). Company posts pretty good 4th QT numbers; balance sheet still looks to be healthy.

Venturs Biosciences (VTUS)(2/20/13). Announces full exercise of overallotment option by underwriters. Law firm brings a suit, which doesn’t concern us, right now.

TranSwitch (TXCC)(2/5/13). Earnings news about what was expected; balance sheet still okay. HDplay Transceiver selected by Kramer Electronics for several video products. HDplay Solution selected by Edge I&D for new high definition interactive LED-LCD display whiteboards; and by Acto for new projectors.

Gevo, Inc. (GEVO)(1/20/13). Sets earnings call for March 5.

EnteroMedics (ETRM)(1/20/13). More pressure put on stock price as company closes $13 million secondary offering. This is still making us nervous, but let’s see.

Codexis, Inc. (CDXS)(1/5/13). Signs enzyme distribution agreement with Strem Chemical. Although quarterly numbers not great, company sees a pretty good 2013 on the revenue side; balance sheet still looks very healthy.

Horizon Pharma (HZNP)(12/20/12). To present at Cowen and Company’s annual health care confab on March 5.

Limelight Networks (LLNW)(11/20/12). Revenues meet expectations but bottom line disappoints; balance sheet still looks very strong.

Telecommunication Systems (TSYS)(11/5/12). Unveils cloud-based high-volume messaging service. To present at Raymond James investor conference on March 6. Also, about half-dozen other releases on various products.

Lionbridge Technologies (LIOX)(11/5/12). Announces enterprise solutions for next generation of outsourcing.

Delcath Systems (DCTH)(10/20/12). To report earnings news on March 13. Announces that the NDA for its Melblez Kit to be reviewed by the FDA on May 2.

Zynga, Inc. (ZNGA)(10/5/12). The usual several dozen stories and news articles. Most notable is that the stock seems to get a nice lift over the advent of online gambling in New Jersey.

ImmunoCellular (IMUC)(9/20/12). Sets earnings call for March 5.

AXT, Inc. (AXTI)(9/5/12). Announces $6 million stock buyback program. Recent numbers could have been better; balance sheet still appears to be real strong.

Meru Networks (MERU)(8/20/12). Announces 3 million share secondary offering at $4.00.

Novatel Wireless (NVTL)(8/5/12). Fourth QT numbers not great; balance sheet still looks pretty strong. Announces next generation cloud-based N4A device manager.

Athersys, Inc. (ATHX)(7/5/12). Slates earnings call for March 12.

Vermillion (VRML)(6/20/12). Balance sheet still looks okay but could be better.

Rare Element Resources (REE)(6/20/12). To present at the PDAC Investor Exchange on March 5.

Capstone Turbine (CPST)(5/20/12). Adds U.S. coal bed methane market to its C200 applications.

Bacterin International Holdings (BONE)(5/5/12). Announces ISO certification. Releases 4th revenue numbers but nothing else.

Mattson Technology (MTSN)(4/5/12). Recent numbers not great; balance sheet still looks good.

Ballard Power Systems (BLDP)(3/20/12). Recent numbers are so-so, but company projects revenue growth in excess of 30% for 2013. ClearGen fuel cell system to operate using biomass-generated hydrogen in California.

Geron (GERN)(2/5/12). To present at the Cowen confab on March 6.

Anadigics (ANAD)(11/20/11). Year-end numbers somewhat disappointing; balance sheet still looks very strong. ProEficient Solution powers Samsung Galaxy music duos and chat. Expands dual-band ProEficient-Plus power amplifier family. FEIC powers 802.11ac router. Offers new power amplifier.

Cover-All Technologies (COVR)(7/20/11). Selected by Society Insurance for several of its products.

Jamba, Inc. (JMBA)(3/20/11). Sets earnings call for March 5. Launches all fruit smoothie flavors for its JambaGO Express Smoothie concept.

Oculus Innovative Sciences (OCLS)(3/5/11). Gets U.S. patent for treating skin ulcers with its Microcyn technology.

Real Goods Solar (RSOL)(1/20/11). To deliver solar power systems to the city of El Cerrito. Launches for homeowners looking to “go green”.

Astex Pharmaceuticals (ASTX)(12/5/10). Reports decent revenue numbers; balance sheet still looks very strong.

PixelWorks (PXLW)(11/20/10). Announces that its PA136 MotionEngine powers Lenovo’s S series smart TV.

RELM Wireless (RWC)(11/5/10). Sets earnings call for March 6.

Inovio Pharmaceuticals (INO)(10/20/10). To present at the Cowen health care conference on March 6.

Alpha Pro Tech (APT)(7/20/10). Schedules earnings call for March 5.

Novavax (NVAX)(4/5/10). To report earnings on March 1, the day we post this Newsletter.

GlobalScape (GSB)(5/20/08). News about several product releases.

Our picks for this Newsletter are another biotech and an energy solutions provider, both NASDAQ-listed.

PEREGRINE PHARMACEUTICALS, INC. (NASDAQ: PPHM) – $1.30. Twelve-month hi-low has been $5.50 – 39 cents. Based in Tustin, CA, with about 170 employees, this biotech has 132.5 million shares outstanding, $33.07 million in total assets, $36.52 million in total assets, little debt, and $23.86 million in total liabilities. Institutional ownership is around 10%. Three analysts rate the stock a “buy”.

We are adding Peregrine Pharmaceuticals, Inc. to the Current Portfolio because it has a nice balance of drug candidates in the hopper that seem promising. And, the balance sheet appears to be half-decent.

Founded in 1981, and public for nearly fifteen years, Peregrine researches and develops monoclonal antibodies for treating and diagnosing cancer and viral infections. Its products in clinical-stage development include bavituximab, a phosphatidylserine-targeting antibody, which is in Phase II clinical trials for treating front-line and second-line non-small cell lung cancer (NSCLC) and pancreatic cancer; and Cotara, a DNA/histone-targeting antibody that is in Phase II clinical trial for treating recurrent glioblastoma multiforme. The company is also developing bavituximab in combination with ribavirin, which is in Phase II clinical trial for treating patients with genotype-1 hepatitis C virus infection. In addition, it has investigator-sponsored trial programs that evaluate bavituximab for treating patients with liver cancer, second-line castration resistant prostate cancer, HER-2 negative metastatic breast cancer, and locally advanced or metastatic NSCLC.

Through its wholly-owned subsidiary, Avid Biosciences, Peregrine offers integrated current good manufacturing practice (cGMP) commercial and clinical manufacturing services in the U.S., including contract manufacturing of antibodies, recombinant proteins and enzymes; cell culture development; process development; and testing of biologics for biopharmaceutical and biotechnology companies under cGMP. Peregrine has license, research, and development agreements with the University Of Texas Southwestern Medical Center at Dallas, Affitech A/S, and Merck.

In mid-February, Peregrine announced results from a Phase II clinical trial of bavituximab in Stage IV pancreatic cancer. This showed top-line results demonstrated signs of anti-tumor activity in difficult to treat patients. The results were not greeted enthusiastically by some, but these were from patients with little to lose.

Unlike most small R&D biotechs, Peregrine does garner some revenue but still chalks up some big losses. For example, during the quarter ending 10/30/12, revenue was $6.13 million with $8.75 million in losses.

We like all that the company has in the hopper and we also like the agreements it has with some major biopharma/medical names. However, we should note that this company has its skeptics, but, for now, this doesn’t bother us.

Our 24-month target for the stock is $2.25 to $2.75.

For more information, contact PPHM at 714-508-6000;

ECHELON CORPORATION (NASDAQ: ELON) – $2.63. Twelve-month hi-low has been $5.68 – $2.07. Based in San Jose, CA, with about 300 employees, this energy solutions provider has 43.1 million shares outstanding, $92.81 million in total current assets, $123.58 million in total assets, and $39.8 million in total liabilities, of which $19.63 million is long-term debt. Institutional ownership is around 25%. Three analysts rate the stock a “buy” and five have it on “hold”.

With energy prices rising again, we thought that a “smart grid” play like Echelon Corporation should be added to the Current Portfolio. The company has seen declining revenues over the last FY, but it is in the process of restructuring operations as it enters new and promising territories

Founded in 1988, and public for over fourteen years, Echelon is basically an energy control networking company. Its solutions enable everyday devices, such as air conditioners, appliances, electricity meters, light switches, thermostats, and valves to be interconnected. Its technologies connect more than 35 million homes, 300,000 buildings, and 100 million devices to the smart grid. Also 500 cities are now using their Smart Street Lighting solutions at up to 30% less cost than low-energy luminaries alone.

Echelon’s product portfolio include smart transceivers, smartServer controller, LNS and openLNS operating system, third party software, Smart Meters, Edge Control Nodes (ECNs) or Data Concentrators, NES System Software, Element Manager, which is a browser-based software that provides network analysis, graphed statistics, and automated network management, and Control Point Modules.

Echelon operates in most parts of the globe. At the end of January, the Concord, MA, Municipal Light Plant completed an initial trial of the company’s innovative Edge Control Node and anticipates testing more applications in the near future. Earlier in the month, the company and one of Brazil’s largest meter manufactures completed a 3400 unit pilot in the Parintins City project with Electrobas. In early February, Echelon was selected for the Smart Grid Gotland project in Sweden.

For FY2012, ending 12/31/12, revenue was $134 million with $13.18 million in losses compared to 2011 revenues of $156.48 million and $13 million in losses.

Yes, the company took a revenue hit last year, but we are optimistic that its “strategic transformation” could be a success if energy prices keep rising.

Our 24-month target for the stock is $4.50 to $4.75.

For more information, contact, ELON’s Colleen Martell at 408-832-0147;

Look for the March 20, 2013 Newsletter to be posted on 3/18 or 3/19.

Thank you,