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Hello Readers,

Since the last Newsletter, we closed six positions; four for gains and two for losses.

CORCEPT THERAPEUTICS (12/20/09). Closed position 5/5/10 at $3.90 for a 56% GAIN.

ORCHID CELLMARK (12/5/09). Closed position 5/3/10 at $2.17 for a 53% GAIN.

CHELSEA THERAPEUTICS (1/20/10). Closed position 5/3/10 at $4.23 for a 51% GAIN.

CLARIENT (3/5/10). Closed position 5/3/10 at $3.18 for a 50% GAIN.

ENCORIUM (5/20/07). Closed position 5/3/10 at $3.60 for a 87% LOSS.

ADVANSOURCE (12/20/06). Closed position 5/2/10 at 38 cents for a 81% LOSS.

Corcept Therapeutics and Orchid Cellmark began a steady upward move in mid-April and kept climbing to our 50%-plus target; and pretty much the same could be said for Chelsea TherapeuticsClarient started its march at the end of April on news about the effectiveness of the company’s lung cancer drug candidate. And, we closed Encorium and AdvanSource for some bad losses.

For a time, it looked like the markets were staring into the abyss due to the debt overloads in Europe. Then, the European Central Bank and the IMF promised to throw a trillion dollars at the faltering socialist states, and, PRESTO, everything is wonderful, again. Yeah, right. And, don’t forget that $200 billion of the trillion comes from U.S. taxpayers via their contribution to the IMF and Fed printing presses. We’ve said it at least several dozen times over the last year or two, that this is all going to end badly. We had a glimpse of hell a few weeks ago. Needless to say, our Current Portfolio took a bit of a beating thanks to the market’s latest swoon.

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.

CombinatorX (CRXX)(5/5/10). Recent numbers look great thanks to a $40 million milestone payment from Covidien; balance sheet still looks strong. BTW, the recommended price should have read $1.44, not $1.34, which we have changed along with a target price of $2.50 to $2.75.

American CareSource (AMCI)(4/20/10). Adds S&S Healthcare Strategies to client portfolio.

Novabay Pharmaceuticals (NBY)(4/20/10). Balance sheet still looks okay. Advances three Phase 2 clinical trials of first-in-class anti-infectives.

China Direct Industries (CDII)(4/5/10). In contract to supply manganese ore to a manganese trading/refiner in China; contract expected to generate up to $18 million in revenue. Begins process to restart production at two magnesium facilities. Releases pretty nice-looking quarterly numbers; balance sheet still looks strong.

Novavax (NVAX)(4/5/10). Announces publication of a pre-clinical study with its pandemic 2009 H1N1 influenza virus-like particle vaccine. Recent balance sheet still looks good.

NeuroMetrix (NURO)(3/20/10). Latest balance sheet still looks good. Brokerage house downgrades stock from a “buy” to “neutral”.

Achillion Pharmaceuticals (ACHN)(3/5/10). Announces positive once-daily dosing results with ACH-1625 to treat Hepatitis C. Recent balance sheet still looks good.

Zagg, Inc.(ZAGG)(2/20/10). To distribute invisibleSHIELD Mobile Protection with Cincinnati Bell. Quarterly results below analysts expectations; balance sheet still looks okay.

Cytokinetics (CYTK)(2/5/10). Sets annual stockholder meeting for May 20. To present data at Thoracic Society 2010 confab on May 18.

NIVS IntelliMedia (NIV)(1/20/10). Recent numbers look pretty good, as does balance sheet.

CytRx (CYTR)(1/5/10). Recent balance sheet still looks strong. Says INNO-206 rapidly shrinks human tumors in an animal model of multiple myeloma.

Real Goods Solar (RSOL)(12/5/09). Latest numbers show third consecutive quarter of profits; balance sheet still looks good.

OXiGENE (OXGN)(11/20/09). Recent balance sheet still looks good.

Qualstar (QBAK)(10/20/09). Latest numbers not great; balance sheet still looks good.

Solta Medical (SLTM)(10/5/09). Launches illumiNATION tour in Canada. Brokerage firm gives the stock a “buy” as company and Alma Lasers resolve patent disputes. Recent numbers not bad; balance sheet still seems strong.

BioSante Pharmaceuticals (BPAX)(9/20/09). Recent balance sheet shows strong cash position thanks to $41.2 million secondary offering. Plans new prostate cancer drug testing.

Investors Capital (ICH)(9/20/09). Exceeds $1 billion in assets under management.

BioClinica (BIOC)(8/5/09). Releases nice looking revenue and income numbers; balance sheet still looks good. (SLRY)(7/5/09). To release earnings on May 25. Joins with Hewitt Associates to offer clients consulting services.

USA Technologies (USAT)(6/5/09). Company is bleeding too much red ink and stock is getting crushed. We are placing this on the “Endangered List”.

Durect Corp (DRRX)(4/20/09). Recent balance sheet looks strong.

Ligand Pharmaceuticals (LGND)(2/20/09). Latest balance sheet still seems okay.

The Orchard Enterprises (ORCD)(11/20/08). Quarterly numbers improve over a year-ago quarter; cash position still looks good.

Identive Group (INVE)(10/5/08). Latest numbers show nice improvement over previous quarter; balance sheet still looks okay.

Oilsands Quest (BQI)(10/20/08). Announces closing of non-brokered private placement of Flow-Through and common shares.

Bridgeline Digital (BLIN)(6/5/08). Quarterly numbers not great, but company still turns a slight profit; balance sheet could look a little better. iAPPS Content Manager wins 2010 CODiE Award for best content management solution. Acquires TMX Interactive.

Microvision (MVIS)(5/20/08). Latest numbers nothing to write home about; balance sheet still looks strong and company reports record $16.7 million backlog for PicoP based products.

GlobalScape (GSB)(5/20/08). Revenue and income numbers improve year-over-year; balance sheet still looks good.

Biolase Technology (BLTI)(4/5/08). Sets earnings call for May 17, the day we post this Newsletter.

ActivIdentity (ACTI)(3/5/08). Latest numbers not good; balance sheet still looks strong.

Hollywood Media (HOLL)(1/5/08). Sets earnings call for May 17, the day we post this Newsletter.

Move, Inc (MOVE)(1/5/08). Company positive on rest of 2010 despite poor QT numbers; balance sheet still looks very strong.

Harbor Biosciences (HRBR)(12/20/07). We are placing this on the “Endangered List”.

Linktone (LTON)(11/5/07). To announce quarterly results on May 20.

LRAD Corp (LRAD)(10/5/07). Latest numbers not great, but still in the black; balance sheet still looks okay.

XATA, Inc (XATA)(9/20/07). Numbers show revenue growth but also some losses; balance sheet still looks good.

YM Biosciences (YMI)(11/5/06). Latest cash position still looks good.

Inventure Group (SNAK)(3/5/06) Brokerage firm gives the stock a “buy”.

8×8 (EGHT)(1/20/06). Acquires Central Host, Inc. that provides managed hosting services and cloud-based computing solutions. Yes, we know this pick is older than Adam and Eve, but maybe someday the company will be discovered.

Our picks for this Newsletter are a AMEX-listed healthcare provider and a NASDAQ-traded technical services provider.

PHC, INC. (AMEX: PHC) – $1.22. Twelve-month hi-low has been $2.47 – 82 cents. Based in Peabody, MA, with about 350 employees, this health-care provider has 19.8 million shares outstanding, $12.52 million in total current assets, $23.26 million in total assets, little long-term debt, and $6.8 million in total liabilities. Institutional ownership is around 20%.

Over the next umpteen years, trillions will be spent on health care and small companies like PHC, Inc. could make a nice chunk of change. Granted, the company’s balance sheet isn’t as strong as we would like it to be, but over the last twelve months, they have been making money.

Founded in 1963, and public since 1994, PHC provides behavioral health services through inpatient and outpatient facilities in the U.S. It offers psychiatric services to individuals who have behavioral health disorders, including alcohol and drug dependency; and to individuals in the gaming and transportation industries. The company’s substance abuse facilities provide specialized treatment services to patients who have poor recovery prognoses and who are prone to relapse. It also operates help lines for employee assistance programs, and call centers for state and local programs, as well as providing management, administrative, and online behavioral health services. The company also operates a hotline called Wellplace, a nationwide 24-hour call center for psychiatric treatment and alcohol and drug addiction treatment at 800-821-HELP.

As of June, 2009, PHC operated two substance abuse treatment centers, two psychiatric hospitals, one residential treatment facility, and eight outpatient psychiatric centers. In March, 2009, the company opened a new adolescent unit at its Seven Hills Behavioral Institute in Henderson, NV, which is expected to bring an added $2 million annually to the top line.

For FY2009, ending 6/30/09, revenue was $46.41 million with $2.45 million in losses compared to FY2008 revenue of $50.32 million and net income of $325,000. During the first six months of the current FY, ending 12/31/09, revenue was $25.51 million and $511,843 in net income. At the current rate, the company seems to be on pace to repeating or beating 2008 numbers.

There isn’t anything really sexy here, but the company has the potential to cash in on what will probably be the next hot growth industry.

Our 24-month target for the stock is $2.00 to $2.25.

For more information, contact the company at 978-536-2777.

WILLDAN GROUP, INC. (NASDAQ: WLDN) – $2.50. Twelve-month hi-low has been $5.25 – $1.20. Located in Anaheim, CA, with about 380 employees, this technical services provider has 7.2 million shares outstanding, $23.35 million in total current assets, $41.79 million in total assets, little debt, and $12.16 million in total liabilities. Institutional ownership is around 17%. One analyst rates the stock a “hold”.

Sometimes we must like non-sexy companies like Willdan Group, Inc., especially if they started turning a profit, have a good balance sheet, and are poised to fill a vacuum, which in this case may be backstopping potential government layoffs.

Trading on NASDAQ since 2006, Willdan provides outsourced services to small and mid-sized public agencies and large utilities primarily in California and New York. Aren’t those the two states with the biggest debt crisis? It offers a range of engineering services, such as city engineering, building and safety, public works and infrastructure design, construction management, traffic engineering, water and wastewater engineering, structural engineering, planning, landscape architecture, geotechnical engineering, flood control, code enforcement, energy efficiency, sustainability, and environmental consulting and remediation services, as well as climate action plans and greenhouse gas emission strategies.

Willdan also provides public finance services, including district administration and federal compliance services; and financial consulting services comprising economic analyses and financial projects, such as fee and rate studies, special district formation, facility financing plans, economic impact analyses, reassessment engineering for bond refunding, and infrastructure analysis services, as well as formation of new public entities, annexations, and incorporations. In addition, the company offers homeland security services, which include training, emergency operations planning, terrorism and threat vulnerability assessments, planning evaluations and exercises, and public safety and management consulting services.

At the end of April, Willdan was awarded a $7.9 million energy efficiency contract by ConEd subsidiary Orange and Rockland Utilities to implement its new energy efficiency program for small business customers.

For the FY ending 1/1/10, revenue was $61.6 million with $5.6 million in losses compared to the previous year revenues of $73.19 million and $1.6 million in losses. During the 1stQT of the current FY, ending 4/2/10, revenue was $16.95 million with $392,000 in net income.

Our thinking here is that because of the massive pension obligations facing them, governments may start making deep personnel cuts. Of course, certain services will need to be maintained and companies like Willdan could benefit, nicely.

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

For more information, contact WLDN’s Kimberly Grant at 714-940-6329;

Look for the June 5, 2010 Newsletter to be posted on 6/1 or 6/2.

Have a safe holiday, George

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