Frustration = Opportunity

August 5, 2008. We have all suffered losses when the shares of companies we own decline on bad newsthats part of the risk of investing. It is however particularly frustrating when shares decline on good news.and we have a few such cases on our Focus List.

Lime Energy has consistently exhibited its ability to execute its business plan and successfully complete contracts. Revenues have risen rapidly. Our analyst had forecasted revenues to rise from $19.4 million in 2007 to $36 million this year and to $60 million in 2009. Moreover, he projected that the Company will turn profitable in 2009 and achieve earning per share of $0.54. Then the Company announced an acquisition that will result in pro forma 2008 estimated revenues of $60 million and 2009 revenues of $90 million, and should be accretive to earnings. Even so, the stock is down over 50% from its 52-week high.frustrating.

Elron Electronics has a long history of successful investments and has an attractive portfolio of holdings. Yet, not only does the market not award the shares a premium to net asset value in anticipation of the kind of value-creating events that have happened from time to time in the past, but actually sets the stock at about a 50% discount to net asset valuefrustrating.

Revett Minerals finished 2007 with slightly more copper and silver reserves than a year earlier following a year of production at its Troy mine. In June 2008, Revett commenced work at its promising Rock Creek property. The rewardthe stock is trading at about 7 times annualized first quarter earnings, down over 50% from its 52-week highfrustrating.

Of course, all is not frustratingDXP Enterprises continues to report strong earnings progress, and its stock is UP over 50% since being added to the list seven months ago and looks like it has much further to go.

On balance though, the market seems to be very hard on small capitalization stocks. While this is certainly frustrating, I think one would be well-served by taking advantage of current depressed valuations in companies like Lime, Elron and Revett.

Deletion from Focus List

June 3, 2008. We are deleting China Direct Inc. from our Focus List. China Direct was added to the List on March 10, 2008 at a price of $5.94. Since that date the stock has appreciated 51% while the Russell 2000 Index has risen 12%. China Direct's coverage by Dutton Associates has been terminated as the subscription period has expired.

Deletion from List

May 27, 2008. We removed ClearPoint Business Resources from our Focus List before the start of trading this morning. Our analyst has suspended our Strong Speculative Buy rating for the stock, noting that the Company released its 1Q2008 10Q report last week in which it expressed going concern issues. ClearPoint is in violation of several debt covenants and is currently attempting to renegotiate its debt facility. Our analyst believes that unless additional capital is raised and a new debt arrangement finalized, ClearPoint is in jeopardy of being forced to cease operations. This situation is particularly frustrating as we believe ClearPoint has fashioned a promising business model in the human resources management sector. We hope to have the opportunity to revisit this recommendation after the necessary funding is achieved.

Focus List Addition

May 1, 2008. We believe Sofame Technologies Inc. (CDNX: SDW.V) represents a timely investment for those looking for a vehicle to participate in the opportunities created by the increasing economic and environmental pressure for energy conservation and pollution reduction. Sofame custom engineers and manufactures unique, high-efficiency direct-contact heat recovery and hot water heating systems. Sofame's products extract up to 99% of heat from flue gases depending on the application, and also from wastewater, and return the energy in the form of high temperature hot water or superheated make-up air. In addition to economically recovering heat from waste energy, Sofame's products also help customers to significantly reduce greenhouse gas emissions. Using world leading, patented green technology, the Company serves building owners, institutional, industrial and commercial markets through a network of dedicated engineering representatives.

On April 25, 2007 we initiated coverage of Sofame at a price of $0.30 with a rating of Strong Speculative Buy and a 12-month price target of $0.75. The stock responded well to the Initial Report rising to $0.35 over the next two trading days on volume of 367,500 shares. Day three was a quiet day...unchanged on 30,000. However, yesterday the stock dropped sharply back to $0.29 on volume of 222,900. We believe the conversion of the remaining convertible debentures, announced on Monday, April 28, has resulted in a temporary supply of common stock as some debenture holders who received stock at $0.15 per share have chosen to take short-term profits. We believe this weakness represents an attractive buying opportunity and are adding Sofame to our Focus List as of this morning.

Update on Recent Additions

April 2, 2008. China Direct, Inc. today announced that it had received approval for its shares to be listed on the NASDAQ Global Market. Yesterday, the Company announced that after initial review of its operating results for the first quarter, its recent acquisitions and internal forecasts for the remainder of the year, management sees operating results substantially ahead of its current guidance. Management now sees revenues for the full year of 2008 reaching $320 million with net income reaching $24 million. This new guidance replaces management's previous revenue guidance of $270 million and $20 million in net income. This new guidance for 2008 does not take into consideration any potential acquisitions that the company may be contemplating. Management currently evaluates its outlook on a quarterly basis and will update its 2008 guidance following the first quarter results of 2008. Although the revision in the revenue estimate still falls short of our $332 million projection, the new net income figure significantly exceeds our $19 million estimate. Our analyst is reviewing his 2008 EPS estimate and has indicated that he will likely raise it from $0.97 to over $1.00. China Direct shares have risen 25% since being added to the Focus List on March 10. With our 12-month price target at $15.52, we believe the shares have much further to go.

On March 27, we published an Update report on Seabridge Gold. The report discusses the significant expansion of Seabridge’s resource base at a time of rising commodity prices. Even after the recent pullback in gold prices to below $900/oz., the price level is still about $200 higher than a year ago and many industry participants do not believe the longer term advance is over. The shares have not participated in this year’s gold excitement as investors, notably short sellers, have focused on the increased costs in the industry to develop and operate mines. Since being added to the Focus List on March 10, the stock has been roughly unchanged. We maintain our $46 12-month price target and believe the current pullback makes the stock a particularly timely investment.

Update on Recent Additions

April 2, 2008. China Direct, Inc. today announced that it had received approval for its shares to be listed on the NASDAQ Global Market. Yesterday, the Company announced that after initial review of its operating results for the first quarter, its recent acquisitions and internal forecasts for the remainder of the year, management sees operating results substantially ahead of its current guidance. Management now sees revenues for the full year of 2008 reaching $320 million with net income reaching $24 million. This new guidance replaces management's previous revenue guidance of $270 million and $20 million in net income. This new guidance for 2008 does not take into consideration any potential acquisitions that the company may be contemplating. Management currently evaluates its outlook on a quarterly basis and will update its 2008 guidance following the first quarter results of 2008. Although the revision in the revenue estimate still falls short of our $332 million projection, the new net income figure significantly exceeds our $19 million estimate. Our analyst is reviewing his 2008 EPS estimate and has indicated that he will likely raise it from $0.97 to over $1.00. China Direct shares have risen 25% since being added to the Focus List on March 10. With our 12-month price target at $15.52, we believe the shares have much further to go.

On March 27, we published an Update report on Seabridge Gold. The report discusses the significant expansion of Seabridge’s resource base at a time of rising commodity prices. Even after the recent pullback in gold prices to below $900/oz., the price level is still about $200 higher than a year ago and many industry participants do not believe the longer term advance is over. The shares have not participated in this year’s gold excitement as investors, notably short sellers, have focused on the increased costs in the industry to develop and operate mines. Since being added to the Focus List on March 10, the stock has been roughly unchanged. We maintain our $46 12-month price target and believe the current pullback makes the stock a particularly timely investment.

Focus List Changes

March 10, 2008. We are deleting China Biotics from our Focus List and adding another attractive China-based investment, China Direct, Inc. (AMEX: CDS). China Biotics was added to the List on May 1, 2007 at a price of $9.10. Since that date the stock has appreciated 15% while the Russell 2000 Index has declined 21%. While we believe China Biotics remains an attractive holding, we believe that, following recent weakness, China Direct is a particularly timely investment and we are adding it to the Focus List. .

China Direct is a diversified management and consulting company with the mission to create a platform to support, nurture and develop business opportunities arising from the opening of markets in the People’s Republic of China. The Company’s investments in magnesium operations have been particularly successful. Our current EPS estimates are $0.60 in 2007 and $0.97 in 2008. Our analyst has a 12-month price target of $15.52 for the shares (which are now trading at $5.88) and rates the stock a Strong Buy.

We are also adding Seabridge Gold (AMEX: SA) to our List. Despite the move of gold to over $1000/oz., Seabridge has pulled back over 35% from its October 2007 high of $39.50. As the Company continues to expand its resource estimates at its North American development sites, we believe this pullback represents an excellent buying opportunity.

Updates

March 5, 2008. China-Biotics, Inc. announced it has joined the International Probiotics Association (IPA) as an official member. The Executive Director of the IPA stated that “China-Biotics is the first diversified probiotics manufacturer from mainland China, to join the IPA. Having such an important player as one of our industry members expands the network of IPA greatly and gives the Chinese industry greater representation in the organization, which is composed of most of the probiotics industry's world leaders. We look forward to sharing expertise and experience among our global leadership.'' This Company’s earnings should grow dramatically over the next year as capacity comes on stream. Analyst price target is $18.72.

DXP Enterprises will report earnings at 4:00 P.M. Eastern today and have conference call at 9:00 A.M. Eastern tomorrow. We are estimating fourth quarter earnings at $0.81 vs. $0.61. While the quarter will be helped by the completion of a major pump contract, the recent acquisition of Precision Industries adds a significant unknown to the results. We believe if the Company is able to hit our numbers that the stock will respond positively. Analyst price target is $60.

Lime Energy announced it recently completed a lighting system retrofit project for ORCON Corporation of Union City, California. The retrofit project received $15,595 in energy efficiency grant funding from Pacific Gas and Electric Company to help offset the capital requirement and enabling ORCON to save nearly $55,000 annually from reduced energy costs. The entire project is expected to pay for itself through avoided utility costs in just over one year. In addition to the hard dollar savings, there is a permanent reduction of 392,178 kilowatt-hours per year in energy use "The new lights seem to have energized the workers. I have been here 20 years and I can't say enough good things about how this went, plus it was very economical with a fast payback," said Bill Fuson, Facilities Maintenance Manager at ORCON. This project is typical of what Lime is all about: money and energy savings for the client and an improved work environment. That’s why I like this story. Analyst price target is $17.50.

Rocky Mountain Days

February 8, 2008. DXP Enterprises, Inc. announced on February 1, 2008 completion of the strategic acquisition of the assets of Rocky Mtn. Supply, Inc., a business which provides bearings, power transmission, belting, industrial and hydraulic hose, and industrial supplies. DXP paid approximately $4.6 million, net of approximately $0.6 million of acquired cash. The unaudited sales and estimated EBITDA for the acquired business for the 12 months ending December 31, 2007, were approximately $13.6 million and $1.4 million, respectively. We believe this transaction underscores DXP’s continued ability to make accretive acquisitions. We will revise our earnings estimates to include this acquisition after DXP reports full year 2007 results late this month. Our price target remains $60. Additional details about this acquisition can be found in our February 4th Research Note.

On February 5, 2008, Lime Energy announced that it had recieved recognition as the "Rocky Mountain Power Ally." This awrd was presented Lime for saving the most kilowatt hours of any Rocky Mountain Power Trade Ally in 2007 (estimated at over 5 million). Our analyst, Richard West, cites this as another proof of Lime's technology and engineering expertise. His price target remains $17.50.

Deletion from Focus List

January 31, 2008. We have terminated coverage of Internet Gold Golden Lines and, accordingly, are deleting the shares from Our Focus List.

The Beat Goes On

January 25, 2008. The stock market’s recent decline has been particularly hard on small cap stocks. The current Focus List companies, on average, have done better than the Russell 2000 benchmark but down is down. Still, while the overall market careens from panic to relief and back again, the companies on our Focus List continue to do what they are supposed to do…execute and grow. Here are some examples:

Internet Gold-Golden Lines’ 72.4%-owned subsidiary, 012 Smile.Communications (Nasdaq and TASE: SMLC), announced that Israel's Ministry of Communications has granted it a five-year license to provide endpoint network services at its customers' premises. The license will allow the Company to supply, install, operate and maintain all types of endpoint network equipment, including central switchboards, telephone cables, connection closets, etc. As such, the license will enable the Company to provide compete, end-to-end communications solutions. The stock is trading at about 10 times our estimate of 2008 earnings.

Lime Energy announced it recently completed a lighting system retrofit project for Ocean Mist Farms, the largest grower of fresh artichokes in the United States. The retrofit project received over $27,000 in energy reducing incentives offsetting Ocean Mist Farm's capital requirements and enabling the company to save over $52,000 annually from reduced energy costs. In addition to the hard dollar savings by Ocean Mist Farms, the permanent reduction of energy use resulting from this project provides the following environmental benefits each year: 365,175 pounds of carbon dioxide, the leading cause of global warming; 5,405 pounds of sulfur dioxide, the leading cause of acid rain; and 1,815 pounds of nitric dioxide, the leading cause of smog and acid precipitation. Lime Energy’s board has approved a reverse 1-for-7 split as a step toward qualifying for NASDAQ listing. Perhaps the resulting improved liquidity for the stock will help move towards our price target which is twice the current level.

Revett Minerals Inc. reported that as a result of its 2007 exploration program and underground mine development work at the Troy Mine (copper/silver), it has essentially replaced the reserves mined during the 2007 fiscal year. As at December 31, 2007, the estimated reserve life at the Troy Mine was approximately 7.5 years at current forecasted production rates. While the Troy Mine continues to be a pleasant surprise, the big story is Revett’s progress on developing Rock Creek (copper/silver) in northwestern Montana, a potential world class project.

Addition to Focus List

January 18, 2008. We are adding DXP Enterprises Inc. (Nasdaq: DXPE) to our Focus List. DXP's shares have pulled back 40% from the closing price of November 8, 2007, $53.12, at which we reduced our rating from Strong Buy to Buy. This decline is substantially greater than the 10% decline of S&P 500 Index during this period. We believe a combination of profit-taking and concerns about general economic conditions and, more recently, the level of domestic drilling (DXP has substantial exposure to the energy sector), have weighed on DXP stock. However, while fourth quarter 2007 results, which we expect to be reported in late February, are particularly difficult to estimate as the Company integrates the large Precision Industries acquisition, we remain confident that DXP will report a solid gain in the period and further earnings progress in 2008. We believe further market penetration and the defensive characteristics of the food industry, which is an important segment of Precision’s business, should help shield DXP from any shortfall caused by a modest weakening in overall economic activity. Our earnings per share estimates remain $0.81 (vs. $0.61) for the 4Q 2007 and $3.46 (vs. $2.67) for 2008. Our 12-month price target for the shares remains $60.00, and this indicates upside potential from the current price of 90%. Even if a slower-than-expected economy causes some slippage in earnings, we believe there is substantial upside potential from current depressed levels.

Deletion from Focus List

January 1, 2008. LJ International rallied 65% to $5.72 on Monday, December 31 as investors reacted positively to the long-awaited filing of its 2006 Form 20-F and its report that first half 2007 EPS rose 60%. While these developments were most welcome, this silver lining did not come without a cloud; in the 20-F the Company projected full year revenues of $130 million, up 5% year-over-year, and full year gross margin of 28%. Our analyst, Sally Wallick, points out that these figures imply declines of 15% for revenues and 22% for gross profit in the second half. While the Company's rapid expansion of its retail store operation in China justifiably has created some excitement, I am concerned about weakening consumer trends in the United States and uncertain margins in China. The analyst has maintained the suspension of the rating and, despite the fact that LJ shares remain 44.2% below our Focus List inclusion price ($10.25 on 5/1/2007; the Russell 2000 fell 7.7% during this period), we believe there are too many unanswered questions regarding this Company to warrrant continued inclusion on our Focus List.

News from Abroad

December 31, 2007. LJ International finally filed its long-delayed 20-F for 2006 with the Securities and Exchange Commission. Since the filing was made before year end, the Company should retain its Nasdaq listing. LJ also reported strong 1H 2007 year-over-year results: 34% revenue growth, a 92% increase in net income, and 60% diluted earnings per share growth.
On the other hand, our analyst, Sally Wallick, points out that it appears that results weakened in the second half. In the 20-F, LJI projects full year 2007 revenue of approximately $130 million, up 5% year over year, and a full-year gross margin of 28%. These figures imply second half revenue of approximately $62.8 million, down 15% year over year, and gross profit of $17.1 million, down 22% versus a year ago. The 20-F does not discuss second half results, so we don't have any detailed information on the period's operating performance. Our analyst has not had the opportunity to discuss the information released by LJ with the Company and learn more about second half operating and financial trends and management's plans for 2008. Therefore, she is not yet able to reinstate earnings estimates and our rating on the Company's shares remains Suspended. The stock has been very strong in pre-market and trading and we will review our position with regard to inclusion on the Focus List as more information becomes available.

Elron Electronic Industries settled a dispute with Rafael Advanced Defense Systems. This is good news as the Rafael relationship has been a major value driver for Elron. Our analyst, Barry Raeburn, continues to see Elron as a potential double in the next 12 months.

China Biotics is approaching its high, reached on a spike last February. Our 12-month price target remains 33% above the current price. Longer term the substantially greater earnings levels possible based on the Company's capacity expansion point to much higher valuations.

Good News for Revett

December 14, 2007. Our mining analyst, Mike Niehuser, issued the following note this morning: "Revett Minerals received a favorable determination from the United States Forest Service regarding its Rock Creek project in northwestern Montana. The Rock Creek project is counted among the top 20 silver deposits in the world anticipated to produce 6 million ounces of silver and 52 million pounds of copper annually over a 20 year mine life. Record silver and copper prices should bring attention to the potential development of a world class project at Rock Creek and record cash flow from its Troy mine operation. These factors lead us to increase our rating to Strong Speculative Buy from Speculative Buy. We will review our price target in our next update." Revett has been a disappointing stock on the Focus List. The Company has progressed, the share price has regressed. Buying the shares now, down from our initial recommendation price but after a favorable ruling by the U.S. Forest Service is, in our opinion, like having the opportuniy to bet on the instant replay. By the way, the analyst's current price target, which he will now review, is $2.75

Deletion from Focus List

December 13, 2007. Since we added Evolution Petroleum to our Focus List on 5/1/07 at a price of $3.02, the shares have risen 40%. The Russell 2000, our benchmark index, has dropped 6% during this period. While Evolution is making progress, that progress is being reflected in its share price and the shares are now less than 10% away from our price target of $4.67. Accordingly, we are removing the shares from the Focus List at this time.

Buying Opportunity

December 12, 2007. China Biotics today announced that it has issued a $25 million 3-year convertible note. The annual interest on the note is 4% and it is convertible into common stock at $12 per share until December 11, 2010. If the note is not converted at maturity, the Company will redeem the note to provide the investor with a total yield of 10% per annum including the annual interest. The money from the note is earmarked for the construction of a proposed 150 metric ton per year manufacturing facility that China Biotic believes will be the only large-scale probiotics plant in China that supplies the domestic bulk additive market. The Company has no debt and believes this financing together with another $10 million cash on the balance sheet will be sufficient to fund the construction of the new plant and the roll out of 300 new retail centers. Interestingly, the note provides for mandatory conversion into common stock if the Company achieves a net income of $60 million in fiscal year 2010 (based on the current 17.1 million current shares outstanding and the additional 2.1 million shares that would mean earnings per share of $3.21). Our most recent estimate for March 2009 fiscal year net income is $40 million ($2.34 per share). Our 12-month price target for these shares is $18.72. It seems to me that this morning’s $0.74 share price decline to $11.25 focuses on the modest dilution of this financing and not on the expectations for dramatic earnings growth….looks like a buying opportunity to me.

Addition to Focus List

November 30, 2007. ClearPoint Business Resources shares have risen in the past two days as the overall market rebounded and with the support of a new Update Report from Dutton Associates' Director of Research Dave Archibald, who is the analyst on this stock. However, the shares remain severely and, we believe, unfairly depressed as investors have not focused on the near-term costs and not the longer-term potential of the Company's changed business plan. Even after the move from $1.78 to $2.62 the shares are trading at less than half their high of $6.47 and at less than a quarter of our 12-month price target of $11.00. We believe that the Company will turn the corner to profitability in the fourth quarter and this should help investors focus on the potential for ClearPoint to achieve our earnings per share estimate $0.42 in the year 2008. Accordingly, while the shares may remain volatile in the near term, we believe purchases at the current level will prove extremely rewarding.

Updates

November 28, 2007. Lime Energy continues to gain market acceptance of its energy-saving technology. It was announced today that it has deployed its eMac technology in 330 branches of a major bank to control 960 HVAC units. Liquidity in these should improve after the stock is listed on the NASDAQ Capital Market. Lime is contemplating a reverse split in order to qualify for this listing. Our price target is $2.50 on the current shraes.

Elron's shares pulled back after third quarter results were hurt by a writedown at its Impliant investment. The Company's NAV remains above $16 without taking into account the potential for future value creation events. The current discount to NAV represents an attractive buying opportunity. Our price target is $22.

Revett Minerals shares have weakened recently, perhaps reflecting concerns about a one-time disruption at its Troy mine and copper prices which have edged below $3.00 and silver prices which have backed down to below $14.50. I would point that our analyst's $2.75 per share target for Revett is based on prices of $2.25 for copper and $12.50 for silver by the end of 2009. In the meantime, the Company announced progress in acquiring mitigation lands that will enable it to proceed with commencement and completion of the Rock Creek project evaluation program.

Focus List Deletion

November 19, 2007. Shumate Industries today reported a loss of $0.09 per share versus our estimate of a $0.01 per share profit for the third quarter. While management expressed optimism about revenue trends and margins in 2008, the Company's 10-Q filing makes it clear that additional financing will be required in the near term. We have decided to remove Shumate from the Focus List pending the resolution of its financing needs.

Focus List Deletion

November 9, 2007. DXP Enterprises' shares have risen 19.7% since their addition to the Focus List on June 15, 2007 while the Russell 2000 benchmark has dropped 6.7%. Since inclusion on the list, DXP has made an excellent major acquisition and reported third quarter earnings that confirmed our positive projections for the Company, and we have raised our price target for the stock from $58 to $60. We remain a big fan of DXP and believe there is a strong possibility of future accretive acquisitions that could result in further price target increases. Still, given the shares' outstanding recent relative perfomance, we believe they no longer fit the timeliness criteria for the Focus List and we are removing the stock from the list as of yesterday's close of trading.

Recent Good News

October 30, 2007. On October 16, Elron announced an $11 million investment by Intel Capital in Jordan Valley Semiconductors, an Elron group company. The advanced X-ray metrology solutions from Jordan Valley enable accurate and precise measurements for various thin-film applications in semiconductor manufacturing. I believe the quality of theis investor underscores what we believe is the high quality to be found in Elron's private company investments. Our price target for Elron is $22.

On October 25, DXP Enterprises reported 3Q EPS of $0.65 vs. $0.52, in line with our $0.65 estimate but well above street expectations. We were early on DXP, putting the stock on our Focus List at $44.49 in June only to see it fall to a low of $33.80 by mid-August. The stock is now up about 10% from the June price while the Russell 2000 is down 2% since that time. Our recently raised price target is $60.

Today, China Biotics announced it has signed a two-year letter of intent with Shanghai Relax Xinqiao Food Co., Ltd. to supply probiotics for the Relax Xinqiao's baked products. The agreement runs through September 2009. This is the first time that its Shining Probiotics brand will be used as a baking ingrediant. Our analyst has an $18.72 price target for the stock.

Also today, Dutton Associates analyst issued an Update report on Lime Energy maintaining his Strong Buy rating and $2.50 price target. Lime continues tor report good news including successful project completions and impressive revenue gains.

Also today, LJ International announced the naming of three new independent board directors who will sit on the Company's audit committee. LJ International believes that this will cure the deficiency with regard to independent director and audit committte Nasdaq requirements. While there remains much uncertainty with regard to the timing of the Compan's release of financial statements, today's news has sent the stock up by over 10%.

Elron Update

October 8, 2007. Barry Raeburn just published an Update Report on Elron in which he sets the current net asset value per share at over $16 and raises his price target for the stock from $18 to $22. This company has a proven ablity to make successful investments in private development stage companies , nuture them, and bring them public generating huge gains which result in large payouts to Elron shareholders. Cash dividends have totaled over $7.00 since 1999. Barry identifies three portfolio companies that may be approaching IPOs. Elron's investments are in exciting growth companies but it's own shares are a true value proposition. Read the report.

Conference Notes

September 11, 2007. China Biotics and Jade International presented at the Roth Conference last week. China Biotics told its story of significant production capacity expansion and dramatic growth in the market for its product. Recognizing the thin market for the shares argues for care in establishing positions, we continue to believe that these shares represent excellent values at current levels. Our analyst, Stanley Ng, raised his 12-month price target price target for the stock in an Update report, dated August 22, 2007, from $16.60 to $18.72.

Jade International’s presentation was more mixed. On the positive side, the Company’s representative reported that sales at the ENZO stores were showing strong gains. Of concern, the wholesale business has slowed reflecting economic uncertainties in the United States which accounts for 70% of its sales. Our analyst, Sally Wallick, reviewed the highlights of the Company’s presentation in a Research Note dated September 6, 2007. The continued delay in the filing of financial reports for the fourth quarter of 2006, the full year 2006, and the first two quarters of 2007 is of concern not only because of the difficulty it causes in generating revenue and earnings projections and because of the risk of Nasdaq delisting, but also as this issue (together with the depressed stock price) raises questions about LJ International’s ability to raise the necessary capital to fund the planned ongoing expansion of the ENZO chain. While we will maintain the stock on our Focus List based on the expectation (hope?) that the Company will be able to file its financial reports before the end of October, we point out that our analyst has suspended her opinion and that the absence of recent financial reports makes this a highly speculative investment.

China News

August 27, 2007. LJ International has been a frustrating investment. Although we have every reason to believe that business for this jewelry manufacturer and retailer is progressing well, the Company's inability to file timely financial information has put its Nasdaq listing in jeopardy, added a significant increment to the risk of this investment, and kept the stock under pressure. Today the Company announced that Haris Tajyar, its investment relations representative, would be presenting, as previously scheduled, at the Roth Capital New York Conference on September 6. Mr. Tajyar has not shed any light on when financial results will be reported and it may be premature to assume that his participation in the New York conference promises the much waited for release of results before September 6. Still, his presence reflects not only his decision "not to hide" from investors at this difficult time, but, in my judgment, that he believes that LJ international still has a story very much worth telling.

China Biotics' 2007 EPS estimate was raised from $0.83 to $0.87 and 12-month price target was raised from 16.60 to $18.72 in a Dutton Update dated 8/22/2007. The same day of the Update's release, the Company announced a three-tyear agreement to supply its biotics to Bright Dairy & Food Co. for its ice cream products. This story continues to progress. It is agreements such as this one that we believe will enable China Biotics to achieve dramatic earnings gains next year; our EPS estimate is $2.34.

Focus List Deletion

August 22, 2007. Maine & Maritimes recently reported better-than-expected second quarter results. In response, our analyst raised her EPS estimates for 2007 and 2008, and reiterated her Buy recommendation and 12-month price target of $35. We continue to believe Maine & Maritimes is an attractive investment. However, since being added to the Focus List on May 31, 2007, the stock has risen 10.4% while the Russell 2000 has declined 5.3%, and we believe this favorable relative price action fulfills a large portion of the potential for near-term outperformance. Accordingly, we are removing Maine & Maritimes from our Focus List at this time.

Addition To List

August 21, 2007. Elron Electronic Industries Ltd. (Nasdaq: ELRN) is an investment holding company with a portfolio of public and private companies and a significant cash position. Our analyst, Barry Raeburn, believes that Elron is at the beginning of a new wave of value creation by recognizing higher values of its group companies. Yet the stock sells at about a 35% discount to its Net Asset Value of near $18.50. We are adding Elron to our Focus List as we believe this stock's significant discount to its NAV limits downside risk in the current difficult market environment while the growth attributes of its investments provide appreciation potential beyond its current NAV.

Two Major Acquisitions in Texas

August 20, 2007. Shumate Industries announced 90 minutes before the close of trading on Friday that it has agreed to acquire privately-held Sunbelt Machine Works for an aggregate of $14.5 million (payable in cash, a seller's note, and Shumate common stock, and including $500,000 in assumed debt). Sunbelt is estimated to generate $16.5 million in revenues and EBITDA of $3.5 million in 2007. Our prior estimates for Shumate were revenues of $12.3 million and break-even EBITDA for 2007. Our analyst, Richard Wolfe, put out a note on Friday and promised to follow-up with additional details as more information becomes available.

We would note that another of our Focus List stocks, DXP Enterprises (a "neighbor" of Shumate's in Houston), has made a habit in recent years of making accretive acquisitions of private companies that have bolstered its growth. DXP recently raised equity in an underwritten secondary offering and is now putting that money to work. On Sunday, DXP announced the acquisition of Precision Industries Inc., an Omaha-based industrial distribution firm with a national footprint with 160 locations and estimated 2007 sales of $250 million. My estimate for DXP's 2007 sales had been $370 million. The purchase price was $106 million in cash (the equity offering netted about $44 million and the rest will come from a new credit facility). This acquisition appears to be an excellent strategic fit. However, the initial press release, unlike the press releases for prior acquisitions, did not provide Precision's EBITDA figures. While there will likely be some synergies in these operations that will improve both sales and margins, we will wait for more information before revising estimates.

In sum, while additional information is needed regarding the Shumate and DXP acquisitions before making specific adjustments to estimates, both deals would appear to be major positive developments for these companies.

Earnings Reports

August 13, 2007. China Biotics reported first fiscal (June) quarter EPS of $0.21 vs. $0.17 in the year-earlier period. The Company provided an excellent update on their business in a conference call earlier this morning. That call can be accessed by either internet or phone (check the press release for details). Keep in mind that while our EPS estimate for the March 2008 fiscal year has been $0.83 (our Hong Kong-based analyst will comment on the 1Q report and make adjustments, if any, on his numbers shortly), the real story is fiscal 2009 for which we have a $2.39 estimate. Although the stock is responding well to today's report, with a $16.60 12-month price target, we believe there is still a long way to go.

Lime Energy's June quarter results were generally in line with expectations. Revenues at $4.1 million beat our $3.8 million estimate while increases in integration and salary costs kept the net, a $0.04 per share loss, pretty much at our $0.03 loss estimate. The important point is that revenues more than tripled the year earlier period level and the Company is exhibiting the growth that we have believed it is capable of achieving in coming quarters and years. Lime's conference call is tomorrow at 10:00 A.M. Eastern. Our most recent 12-month price target for the stock is $2.50, about 35% above the current price.

DXP Enterprises Buy Reconfimed

July 31, 2007. DXP Enterprises Inc. (NASDAQ: DXPE) reported disappointing second (June) quarter results after yesterday’s close of trading. Revenues, reflecting a shortfall in pump shipments (down 11%) and only a modest gain in MRO (maintenance, repair and operating supplies) sales, excluding acquired businesses of 3%, rose 22% from $69.8 million in the year-earlier period to $85.3 million. The revenue shortfall versus our prior estimate of $92.7 million resulted in less favorable gross margin and selling, general and administrative costs as a percentage of sales levels as well. While the gross margin of 28.7% only slightly missed our estimate of 28.8%, SG&A was 20.3%. Earnings per share were $0.56, up from $0.51 a year earlier but well below our $0.74 estimate.

On the positive side, while the pumping solutions revenues declined, backlog in this segment rose from $27 million to $38 million and the Company reports that MRO sales growth which slowed down in the month of June has reaccelerated in July. Management projects overall revenue growth of 37% in the third quarter (our estimate had been 38%) and 36% in the fourth quarter aided by a significant pick-up in pump shipments (our estimate had been 26% against a very good 2006 period). In sum, our full year revenue estimate remains $370 million (versus $280 million in 2006).

We are nonetheless reducing our 2007 earnings estimate from $2.85 to $2.73 to reflect a higher tax rate of 39.5% (assumes 39.6% in the second half) as compared with our previous estimate of 39.2% and higher SG&A expenses as a percentage of sales of 21.2% (assumes improvement in the second half) as compared with our previous estimate of 20.5%. With regard to 2008, we are adjusting our revenue estimate from $453 million to $448 million and our EPS estimate from $3.66 to $3.19 (again reflecting a slightly higher than previously estimated tax rate and a higher than previously projected SG&A expense ratio).

We would point out that particularly the 2008 estimates are subject to revision as the Company has indicated that it expects to resume its acquisition program before the end of 2007, and we note that acquisitions have been accretive in the past.

DXP shares fell 7 ½ points to under $37 in late trading yesterday in response to the disappointing quarter. We believe such a decline is unwarranted in view of prospects of a rapid resumption of higher growth levels and reconfirm our 12-month target price of $58 and Buy recommendation.

Focus List Addition

July 24, 2007. We are adding Revett Minerals (RVM.TO) to our Focus List as of today's close at a price of $1.17. Revett shares have moved lower since our Initial Report on this copper-silver mining company with an operating mine (Troy) and a nearby large undeveloped deposit (Rock Creek) in Montana, despite positive news from the Company. Revett recently reported second quarter production of 3.5 million pounds of copper and 372,330 ounces of silver at the Troy mine which we believe demonstrates the effective restart of the mine with potential for rising production. Growing revenues from Troy should provide additional cash flow for developing Rock Creek, one of the 20 largest undeveloped silver properties in the world. While the commercialization of Rock Creek is a number of years away, we believe the resumption of development efforts at Rock Creek during the current high metal price environment will support higher prices for Revett shares. Near term, the ramping up of production during a time of rising metals prices could generate positive earnings surprises and act as a catalyst for appreciation. Our 12-month price target for the stock is $2.75 (US). The stock’s primary market is on the Toronto exchange.

LJ International Update

July 17, 2007. LJ International announced after the close of trading on July 16 that the filing of the Company's 2006 annual report on Form 20-F is being delayed in order to allow additional time for the Company's accounting firm, KPMG, to complete its audit. On June 1, 2007, the Company announced a change in accountants from Moores Rowland Mazars to KPMG. Our analyst, Sally Wallick , believes that “this delay in reporting financial results is disappointing, although perhaps not too surprising given the relatively recent change in accounting firms.”

While the Company has not indicated any particular issues with regard to its accounting, Ms. Wallick points out that “in light of the change in accountants, it is uncertain to what extent investors can rely on those numbers, since we believe that it is possible they did not take into account certain factors, such as sharply higher accounting fees than previously experienced, an increase in the income tax provision, and a change in the accounting for the Company's investments in Goldleaves International Limited, which trades in rough and pre-formed gemstones, as discussed in a Dutton Associates note dated June 1, 2007.” I occur with our analyst’s belief “uncertainties about the Company's operating and financial performance are likely to overhang its shares until up-to-date financial results are reported.” However, I maintain the opinion that the Company’s long-term potential makes this an attractive speculation. This was true when we added the shares to the Focus List (we commented on the delay in the reporting of results at that time) and, in my opinion, it remains true today. Recognizing the “heightened near-term risk related to these uncertainties,” Ms. Wallick has maintained her Speculative Buy rating on the shares, and I find the shares particularly attractive after today’s weakness (for those investors who understand the risk inherent in any situation where financials have been delayed).

Focus List Deletion

July 11, 2007. Logility Inc. has been an excellent performer for us, rising 34% since its inclusion on the Focus List on May 1, 2007 at a price of $9.35. During this period the Russell 2000 Index has risen 1.07%. As is the case with most investments that perform well, the Company has reported excellent results beating expectations. We have raised our price target for Logility in the past and it would not be surprising, based on the strong recent results, if our 12-month price target, now $13.50, is raised again in the future. Nonetheless, while we believe the stock continues to be attractive for longer-term investors, after the recent run-up it no longer fulfills the shorter term criteria for inclusion on the List. Accordingly, the stock is being deleted from the List as of today’s close of trading at a price of $12.55.

Newly Published Research

July 9, 2007. We published an Update Report on China Biotics today, July 9. The Company recently reported March 2007 fiscal year revenues up 40% and net income up 30% from the fiscal 2006 levels. We are maintaining our rating of Strong Speculative Buy and 12-month price target from $16.60.

A Research Note on July 6 reported that Lime Energy Co. will be presenting at Capstone Investment's Small-Cap Investor Conference 2007 in Milwaukee, Wisconsin, which is being held July 16 and 17. The conference will feature 40 to 50 companies from four different sectors, including Chief Executive Officer of Lime Energy, David Asplund, presenting for Lime Energy. We reiterated our Strong Speculative Buy Rating and our recently raised 12-month price target of $2.50 per share.

Also on July 6, we published a Research Note that commented on Maine Public Service Company (MPS), Maine & Maritimes's regulated electric transmission and distribution utility, receiving approval to raise its transmission rates for retail customers by 10.2%, or $345,000, effective on July 1, 2007. While we viewed this rate increase as a positive development for the Company, we are maintaining our full-year 2007 estimate of diluted earnings from continuing operations for Maine & Maritimes of $0.95 per share. We reiterated our Buy rating on the Company's shares.

Focus List Deletion

July 1, 2007. We believe that American Telecom Services’ offerings address a growing market that will make this an attractive investment over time. However, the Company has reported substantial losses in recent quarters. This alone would not necessarily be the basis for removing American Telecom Services’ shares from our Focus List. However, management has become increasingly reluctant to provide input as to how sales are progressing relative to its goals and to discuss its strategies for the future. Accordingly, although these shares’ rating remains Strong Speculative Buy and we believe these shares continue to have substantial potential, we believe it inappropriate to maintain this stock on our Focus List.

Focus List Update

June 26, 2007. Logility Inc. reported better-than-expected fourth (April) quarter results. Revenues were $12.74 million vs. our estimate of $11.39 million and EPS were $0.14 vs. our estimate of $0.13. The stock responded well to the upbeat press release that highlighted the Company's expanding client base and geographic footprint. At this writing, the shares are up $0.49 to $10.75. Our analyst, David Soetebier, has had a $13.50 price target for these shares.

Maine & Maritimes announced the sale of the New Brunswick division of its Maricor Group, continuing the divestiture of non-reguleted businesses that we believe will leave the Company with an attractively valued utility operation, Maine Public Service Company. Our analyst, Sally Wallick, has a $35 price target for the stock.

Recent Updates

June 19, 2007. We published an Update on Lime Energy this morning. Richard West, our analyst, identified the major positives for Lime Energy as “its new infrastructure, its 21 plus sales team, and its three operating companies that have created the potential for revenue and earnings growth toward profitability in the coming quarters.” We reiterated our Strong Speculative Buy Rating and are increased our price target from $2.00 to $2.50 per share. At that level, with the current outstanding shares, Lime Energy's market capitalization of approximately $134.0 million would put market cap at 3.4x FY2008 estimated revenue.

On June 12, we published an Update on Internet Gold - Golden Lines Ltd. following the Company's 1Q 2007 results. The Company's first set of fully consolidated numbers following the acquisition of Golden Lines did not present any major surprises and were mostly in line with our expectations. In fact, the Company's 1Q 2007 revenues of USD $72.4 million were better than our conservative estimate of USD $66 million, while EPS came in at USD $0.23, a penny below our estimate. Forecasting 1Q 2007 was very tough and we always considered our 1Q 2007 estimates to be very tentative. All in all, Rafael Kapelinski, our analyst, viewed 1Q 2007 as “clearly a strong quarter with virtually all product lines contributing to the result” and believes that “given the solid set of 1Q 2007 results, that the recent weakness in the share price is unwarranted.” We reiterated our Strong Buy rating and our price target of $20.00, which is based on our sum-of-the-parts valuation.

Focus List Addition

June 14, 2007. DXP Enterprises Inc. (Nasdaq: DXPE) has achieved impressive earning gains over the past few years based on improving margins, double-digit internal sales growth, and a string of accretive acquisitions. On May 30, 2007, the Company announced the pricing of a one million share offering at $47 (the completion of the deal was announced on June 6). These shares were registered under a May, 2006 shelf registration. The stock, which closed at $52.09 on May 29, has subsequently weakened by almost 15% to below the share offering price, perhaps reflecting concerns regarding dilution. In fact, we have lowered our EPS estimates from $2.98 to $2.85 (vs. $2.08 in 2006) for 2007 and from $4.01 to $3.66 for 2008. However, we believe that with its $50 million credit line now fully available and with almost $10 million in additional cash coming from this sale purchase, the Company will have the flexibility to be increasingly aggressive in making acquisitions, which are likely to be accretive, in coming months. Accordingly, we view the stock as particularly attractive at current levels. Our 12-month price target is $58.

Up and Out

June 13, 2007. Up: Lime Energy, with key financing in place, is now well-positioned for growth and the market has taken notice. The shares are 35% since the May 29, 2007 close (the day before the Dutton conference) in San Francisco. Our 12-month price target remains $2.00.
LJ International reports it booked $24.2 million in sales at the 2007 JCK show, up from about $22 million last year and $20 million the year before. LJ shares rose over 4% following the release of this news. I would also point out the article in the June 13 Wall Street Journal about the plans for a Venetian Hotel/Casino in Macau. LJ's store in Macau is doing very well and its second store in Macau, albeit much smaller than the first, will be located at the Venetian. Our 12-month price target remains $16.00.

Out: We are deleting Green Plains Renewable Energy from the Focus List. The subscription period has expired and the Company has decided not renew its subscription. Certainly, the near-term benefit of research coverage for an ethanol company is, at best, hard to quantify in the current market environment. We do believe, however, that Green Plains’ shares are particularly attractive at current levels and have substantial upside potential based on our following expectations: 1) corn production will be sufficient to accommodate demand from ethanol producers and corn prices will pull back from current high levels in the $4.00 area as this becomes more evident later this year; 2) ethanol prices will hold in the $2.00/barrel area; and 3) Green Plains will achieve significant profits as its two facilities come on stream, one at the end of the second quarter and the other near year end. Any weather or geopolitical events that drive up gasoline prices could also be a positive for ethanol shares.

Transaction Activity

June 6, 2007. In the past week, the following three Focus List companies announced acquisitions, agreements, and/or financings. We believe such transactions will be common among the stocks on the List, reflecting their growth objectives.

On June 1, Green Plains Renewable Energy announced that it has entered into an agreement to purchase Essex Elevator, Inc. The elevator is located approximately 5 miles to the northeast of the Company's Shenandoah ethanol plant on the same rail line the Company will use to transport its ethanol and distillers grains. The purchase will give Green Plains the capability to store an additional 2.8 million bushels of corn. The Company believes there will be times of the year that having this storage capability will be advantageous for GPRE. The purchase will also expand the Company's corn purchasing area. The agreement contemplates a closing date sometime this summer, which will be ahead of this year's harvest season. The Company stated Green Plains will begin posting a corn bid for delivery to Essex immediately.

On June 5, Shumate Industries announced that the Company had executed a non-binding letter of intent with Haskel International Inc. outlining its interest in licensing Shumate's new proprietary Hemiwedge® technology to Haskel for use in new sub-sea high pressure products. The indication of interest and proposed terms of the license agreement grants Haskel exclusive license to Shumate's proprietary Hemiwedge® technology worldwide in the field of sub-sea products in smaller bore size applications. Under the terms of the letter of intent, the license fee at signing is proposed within a range of $250,000 to $500,000, which is a function of the final scope of the license and other terms within the proposed agreement. Other terms will include paying a royalty on sales of Hemiwedge® licensed products with minimums over time. All parties are working to complete additional required marketing studies, due diligence and a definitive agreement over the next 120 days. Shumate had been working with Haskel for almost two years to develop new proprietary products that operate at very high pressures for use in sub-sea applications

On June 6, Lime Energy Co. announced that it had acquired Texas Energy Products, an energy efficiency firm based in Austin, Texas. The transaction valued at $500,000 consisted of a combination cash and Lime Energy common stock. Texas Energy Products designs and installs energy efficient lighting systems for leading corporate customers including Lockheed Martin, Rolex USA and Sprint, as well as institutions like U.T. Systems, Harding University, and M.D. Anderson Hospital. In addition to lighting Texas Energy Products also offers other energy saving solutions, such as solar window films, reflective roof systems, energy procurement and energy management systems. Lime recently signed some significant projects in Texas. Texas Energy Products immediately gives the Company a physical presence and ability to leverage its collective resources. Lime also announced the closing of an additional $2 million completing a total private placement of $5 million in convertible debt. Last week, the company reported its Chairman, Mr. Dick Kiphart, invested $3 million in the convertible debt private placement and invested an additional $100,000 in this final tranche. As previously reported, proceeds will be utilized in part to set up a finance subsidiary to provide customer financing as well as to fund other potential acquisitions.

Focus List Addition

May 24, 2007. We are adding Maine & Maritimes Corporation to our Focus List. Maine & Maritimes is a holding company for Maine Public Service Company (MPS), a regulated electric transmission and distribution utility serving much of northern Maine, and The Maricor Group (TMG), an unregulated professional engineering services and solutions firm. In addition, the Company owns 50% of the common stock of Maricor Properties Ltd. (MPL), a Canadian real estate development, redevelopment and investment company. The Company plans to divest its unregulated operations and return to a focus on its regulated business, MPS. We consider this strategic refocus a positive development with the potential to improve financial performance and enhance shareholder value long term. Given Maine & Maritimes’ refocus on the regulated electricity transmission and distribution business, we believe that investors are now valuing the Company as a utility. In that regard, among the key investment considerations are the following: less complexity, potential for reinstatement of the dividend next year, defensive characteristics, prospects for a substantial earnings rebound, and an attractive valuation relative to other utilities.

Other positives include: the 2006 construction of Maine’s largest wind farm within MPS’s service territory; MPS’s pursuit of a large-scale transmission project that would connect it to the New England electric grid; and new legislation being considered in Maine to allow in-state utilities to once again own electricity generating assets, which could result in new revenue and growth opportunities for MPS and, perhaps, enhance its value as an acquisition candidate, and the $36 million value of stranded cost cash flow from 2007 to 2012. .

In light of Maine & Maritimes’ compelling valuation relative to those of other utility companies and our projections of strong year-over-year earnings per share growth in 2007 and 2008, we recently reiterated our Buy rating on the Company’s shares in an Update Report on May 22. Our 12-month target is $35 per share.

Earnings Recaps

May 23, 2007. On May 15, Shumate Industries reported first-quarter revenues of $2.4 million, in line with Dutton forecasted revenues, as revenue realizations at the Company's Hemiwedge Valve Corp subsidiary offset a slight decline in top-line results at the Shumate Machine Works subsidiary. The Machine Works' 24% gross margin for the most recent quarter compares favorably to profitability levels for the prior year, an indication that pricing power remains strong in that business segment. In the Company's valve business, we continue to expect positive developments during 2007 in terms of growth of cartridge valve sales, licensing of a subsea high-pressure valve, and completion of development of a downhole isolation valve. Shumate was strong before the news, rising from $1.59 to $1.76 on heavy volume on May 14, and continued to rise after the announcement, closing at $2.11 on May 16. The stock has pulled back to $1.80, which we believe represents an attractive entry point given our 12-month price target of $3.00.

On May 15, Internet Gold reported first quarter basic EPS of $0.23 vs. $0.09 a year earlier, and $0.01 below our estimate. This quarter the Company also published a fully diluted figure of $0.19 that took into account its convertible bonds and warrants. The stock, which had been strong, fell sharply. Perhaps concerns about the shares from the ongoing conversion of bonds and warrants that the Company described played a role. In any event, the underlying fundamentals remain attractive and we have a 12-month price target of $20.00.

On May 21, American Telecom Services reported third (March) fiscal quarter results. They were somewhat confusing because some of the December quarter rebates were accounted for in the March quarter. If you take this into account the $6.9 million in reported sales were okay. There are 10,000 new store outlets coming on line this summer. Plus fixed mobile (WiFi) could be huge in 2008. In our judgment, the Company’s inability to do a better job in getting their story out to the investment community creates a buying opportunity for those with a little patience. Our analyst has an aggressive price target of $9.00 for these shares.

Focus List Deletion

May 23, 2007. When we included 21st Century Holding on the Focus List less than a month ago we expected the report of first quarter results would help the stock. Instead the Company’s report, released on May 3, was disappointing as was its revised earnings guidance for 2007. The shares plummeted from $19.99 at the close of trading on May 3 to a closing low of $9.85 on May 11. We chose to keep 21st Century on the Focus List not only because we viewed the stock as particularly undervalued under $10 (despite the fact that the analyst had reduced his 12-month price target from $35 to $14) in hopes that the Company would take steps to bolster its shares in the near term. Subsequently, 21st Century announced the appointment of a new President, approval of a $5 million share buyback, and declared its regular quarterly dividend of $0.18. The stock has rebounded 18% from its low. With a current yield of 6.2% and a price/earnings multiple, based on the mid-point of management 2007 EPS guidance of $2.25, of 5.2, the shares still appear to offer good value. A move to the price target plus the current yield would generate a better-than 25% total return, and the analyst rates the stock a Speculative Buy. Still, at this point, with a lot of the possible near-term good news out and with the hurricane season just beginning, we believe the shares may not be right from a timing standpoint for inclusion on our Focus List and we are removing this stock from the list as of the close of trading today.

Good News and More Good News

May 14, 2007. 21st Century Holdings today announced a $5 million share buyback program. The purchase of over 450,000 shares would represent almost 6% of the shares outstanding and over 7% of the float. Moreover, I think it sends a positive message about the $0.72 annual rate dividend. While the first quarter results and the revised 2007 earnings guidance disappointed us as well as the rest of the market, we continue to believe that the shares, trading at 4-5 times current EPS guidance of $2.00-$2.50 and providing a current yield of about 6.7% could provide investors with an attractive return in coming weeks and months.

Internet Gold shares have been acting well. I just want to pass along a reminder that the Company will report its first quarter results tomorrow, May 15, before the market is opened. This will be the first quarter in which the Company reports fully consolidated results following the acquisition of Golden Lines, and we are looking for EPS of $0.24 vs. $0.09.

LJ International stock appears to be benefiting this morning from strength in the Hong Kong stock market where about a third of volume is estimated to be due to fresh cash from mainland Chinese banks and institutional funds following Friday’s announcement by the China Banking Regulatory Commission (CBRC) that it has removed equity investment restrictions on domestic banks, which under the Qualified Domestic Instutional Investor (QDII) scheme were not allowed to directly invest in offshore stock markets. Under the revised rules, mainland banks may invest up to 50 pct of the net value of their offshore investment in stocks.

Focus List Update

May 8, 2007. With regard to Green Plains Renewable Energy, we would note that he focus of ethanol stock investors has been on corn prices and, therefore, on the progress of corn planting. With the estimated corn acreage target of 90.45 million acres, the issue has been on whether the weather will allow farmers to get all this acreage planted in a timely manner. Conventional wisdom says that delays past May 10th tend to result in lower yields ("a bushel a day after the 10th of May"). Moreover, if planting is delayed into late May, some farmers may opt to switch (in some cases, switch back) into soybeans.

Certainly, the weather has been inhospitable to planting this season. Extreme weather has spawned tornados and caused flooding. So it was really surprising to see the progress farmers made in planting corn last week. The weekly USDA crop progress report was released after the markets closed Monday. The 53%-planted national figure, while still 10 points behind average, was up sharply from 23% a week earlier. Corn planting in Illinois was reported at 72% complete, up from 36% a week ago; Iowa was reported at 53% vs. 14%; and Minnesota was reported at 70% vs. 28%. While this Spring's harsh weather has been cause by concern, these figures support our belief that armed with better techniques and equipment, the nation's farmers don't need much leeway to get the job done. Accordingly, we look for corn prices to ease back from current levels in coming weeks. We continue to believe the corn/ethanol price ratio will allow ethanol refiners like Green Plains to be highly profitable.

Lime Energy reported preliminary first quarter 2007 results yesterday. In a Research Note published yesterday, our analyst, Richard West, commented that "Considering the seasonality of the first quarter, the increases in revenue and gross profit bodes well for continued increases for the balance of FY2007."

21st Century Holding continues to get beat up in the market place. As disappointed as we were by the first quarter report and revised 2007 guidance, selling at 4x-5x revised guidance and at only 20% above book value, I believe the stock appears to offer the potential for at least a tradable bounce from current levels.

Good News and Bad News

May 4, 2007. First the bad news...After the close of trading yesterday, 21st Century Holding Co. reported awful first quarter results and slashed its earnings guidance for 2007 from $4.50 to a $2.00 - $2.50 range. While pricing pressure from the State of Florida's Citizens Property Insurance Corporation has been exacerbated by recent directives by the state's governor and will understandably affect future earnings, I am disappointed that management left prior guidance unchanged until now as I find it hard to understand how new policies could have had such an impact on a past quarter. In today's Research Note on 21st Century, our analyst, Richard West, lowered his 12-month price target from $35.00 to $14.50. The Company appears to be in strong financial condition and a share buyback that would bolster the stock price and increase earnings per share cannot be ruled out. At the current depressed price ($11.16), the shares have some appeal for a modest bounce after today's wave of selling (as of this writing at 12:40 P.M. Eastern volume is almost 1.5 million shares, more than 20% of the 6.6 million share float). Still this stock's appeal as an investment vehicle has been badly damaged in my opinion. I'll keep it on the Focus List for now.

Now the good news...Despite the trouncing we took in 21st Century the Focus List as a whole is about even with its start at the close trading on April 30th. We've seen gains of 4% or more in Evolution Petroleum (EPM), American Telecom (TES), Internet Gold - Golden Lines (IGLD), Logility (LGTY), Shumate (SHMT) and LJ International (JADE). You might want to check out Richard Wolfe's May 2nd Report on Evolution.

One note of caution...LJ International announced excellent fourth quarter 2006 results on February 15th. However, the Company has yet to file its 10-K. While LJ's foreign company status means that it does not have a particular time requirement to get this done, our analyst, Sally Wallick, notes that the Company has been punctual in the past. So, although everything seems to be going quite well for LJ and the stock would appear to be attractive for above-average appreciation from current levels, investors should be aware of this "anomaly."

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