Tuesday, December 05, 2006

OTCBB Graduation Party

Dan Holtzclaw here, author of the best selling Little Black Book of Microcap Investing. You may want to keep your eyes on a stock that is mentioned in my book. The stock is International Power Group (Pink Sheets: IPWG). This stock has amazing potential.

Waste to energy. It is the wave of the future and IPWG holds the key to this technology!

IPWG recently received notification that its SEC Form 10-SB Registration Statement has cleared comments by the SEC. Essentially, this means that IPWG will soon be able to move off of the Pink Sheets and onto the OTCBB. This may not sound like a big move, but believe me...it is. The move from the Pinks to the OTCBB will allow many institutional investors to take a position in IPWG. This stock has quite a following and many were waiting for this day to come.

Last year, IPWG hit a high of $1.90 and has since been mercilessly shorted by a number of hedge funds and institutions. Many of these shorts felt that IPWG was nothing more than a pipe dream, that it was nothing more than just another penny stock scam. As such, they felt that they could short IPWG into oblivion. The short position for IPWG has been estimated to be anywhere from 9 to 20 million shares. Speculation has it that IPWG was recently held in the 30-40 cent range as institutions attempted to slowly cover their short positions in IPWG. With yesterday's news, the shorts have seen that IPWG is for real and now the rest of the investing public knows it as well. As such, it appears that the shorts are running scared and beginning to accelerate their covering.

IPWG has risen over 50% today alone on just over 500,000 shares of trading volume. The shorts are in trouble. While IPWG does have a larger amount of outstanding shares, the majority of those shares are in the hands of company officers. Of the available public float, a huge chunk of that float is held by friendly hands. The realistically available shares for the shorts to cover with are few. Considering the fact that the shorts have had their way with IPWG since it hit $1.90, they have alot of covering to do.

It is expected that IPWG will list on the OTCBB very soon. In a press release dated 4 Dec 2006, IPWG CEO Peter Toscano stated, "We are pleased to have accomplished this step in our planned move to the OTC Bulletin Board. Our planned listing on the OTC Bulletin Board would be a significant development in that it would enhance the visibility of our company and provide better liquidity for our shareholders." With IPWG's impending move to the OTCBB, expect the shorts to ramp up their covering and expect newcomers to jump on the IPWG bandwagon.

This news alone may sound great, but you have not even heard the best part yet! Grab a copy of my book at Amazon.com and you will see why IPWG is an amazing stock!

As always, please see my disclaimer.

Sunday, November 12, 2006

A Safe Pink Sheet Investment? YOU BET!!!

Dan Holtzclaw here, author of the best selling Little Black Book of Microcap Investing. This book is available at Amazon.com for up to 30% off. The 1st printing of the Little Black Book has already sold out and the 2nd printing is on the way! I have an interesting stock for you this week. I am very excited about this one. You will see why...

Are you tired of OTCBB and Pink Sheet investments that must be constantly monitored? One common complaint about OTCBB/Pink Sheet stocks is that investors just don't have the time or energy to babysit these high risk investments. If you invest in these stocks, you know the scenario. While many OTCBB/Pink Sheet stocks certainly do enjoy incredible runs that achieve astronomical gains, these runs are often short lived and fizzle out just as fast as they come into being. If you were not watching your computer on that particular day and time, you could miss the entire run completely. Over the years, I have seen OTCBB/Pink Sheet stocks rise and fall hundreds of percentage points within a matter of hours. If you were out of town or stuck in an important meeting, you would be out of luck. The worst part of this scenario is that once a stock makes its big run, investors often move onto the next "hot stock" and you will be left holding the bag as interest in your stock quickly fades away. This situation can be avoided by placing a limit sell order, but many investors don't do this for a variety of reasons.

What if there was an OTCBB/Pink Sheet stock that broke this mold? A stock that could offer stout gains, yet shed the requirement of continuous scrutiny? Well, my friends, there are a few out there. One of these stocks is FutureVest (Pink Sheets: FRVT). In my opinion, this stock may be one of the safest bets that I have ever seen on the OTC market.

For starters, let's examine the share structure of FRVT. According to Fidelity Transfer Company, FRVT's transfer agent based out of Salt Lake City, Utah, FutureVest has 30,016,515 total shares issued and outstanding. Of these shares, the transfer agent indicates that just over 27 million are restricted. The public tradable float for FRVT is 2,914,129 shares. By all measures, this is an extremely small float, especially for an OTC stock. Now, here is the unbelievable part...the actual available tradable float for FRVT is rumored to be a mere 200,000 shares as nearly 2.7 million non-restricted tradable shares are said to be held by investors and hedge funds that are "friendly" to the company.

200,000 shares? Is it possible for a stock to have a float that small? If you examine the recent trading data for FRVT, the 200,000 share float sounds plausible. Over the past 10 days, FRVT has risen over 18% on average trading volume of just over 4,000 shares. I have been monitoring this stock and it seems as if FRVT gains a nickel each time someone buys shares in the company.

With FRVT being an OTC stock, and an "expensive" one at that, one might fear that this stock is a prime candidate for shorting activity. My investigation of FRVT has indicated that a number of institutions own a substantial number of shares in this company. Apparently, these institutions have owned these shares for many years and acquired them at prices considerably less than where the stock currently trades. These institutions are friendly towards the company and have protected it against attempted shorting activity. When a short appears on the horizon, these institutions unleash a flurry of buying activity that effectively kills the short. As such, the short position against FRVT is non-existent.

In the world of OTC stocks, share control is one of the most critical aspects of success and is often overlooked. Many OTC stocks have a great story and wonderful prospects, but they have no control over their shares. This is usually due to poor financing deals and issuance of shares for services rendered. This often leads to the precarious situation of large short and naked short positions in addition to wholesale dumping of shares on the market. This, in turn, leads to a death spiral of continually shrinking stock prices and share dilution. This situation is one that you will never have to worry about with FRVT. FRVT's control of its shares is phenomenal. Over the past 7 years, FRVT has painstakingly gained and maintained control of its shares. Between company insiders and friendly institutions, 99.3% of the total issued and outstanding shares for FRVT are said to be in safe hands. In fact, I have heard that the largest individual owner of non-restricted tradable FRVT shares owns 30,000 shares. Essentially, the company has control of almost all of its shares.

One criticism that many investors will have of FRVT is its miniscule trading volume. Agreeably, a trading volume of 4,000 shares per day is rather light. However, let us consider a few things about this volume. First of all, not many people know about this stock. FRVT does not pay for any public exposure and my conversations with the FRVT CEO indicate that the company never will. In my book, this is a good thing. Not paying for public exposure means that there will be no "free shares" floating around waiting to be dumped on the market. Second, FRVT is by all accounts an "expensive" OTC stock. Many OTC investors want stocks that cost a dime or less. Asking these OTC investors to buy a $3 stock is like asking them to dump their Hyundai for a Rolls Royce. Third, shares in FRVT are not easy to come by. Likely due to its incredibly small float, the FRVT MM's do not easily part with their FRVT shares. You can forget about getting FRVT shares under the ask. Heck, in many cases, you can forget about getting FRVT shares at the ask. Oftentimes, when I have attempted to purchase this stock, I have found it necessary to offer 5 cents more than the ask in order to get filled.

Is the volume situation for FRVT likely to improve soon? Personally, I would answer "Yes" to this question. If you look at the trading history for FRVT, you will notice that its volume has picked up over the past 10 days. I am hearing that a group of California based investors has taken an interest in this stock and are beginning to acquire shares. This interest may be due to a rumor that FRVT may soon list on a major exchange. The company alluded to this in its November Letter to Shareholders and its recent acquisitions and current share structure/financial strength are indicative of an impending move to a major exchange. I have heard, and this is simply gossip around the water-cooler, that FRVT could be listed on a major exchange as early as January 2007. With that being said, I expect interest in this company to ramp up considerably over the next 90 days.

Up to this point, I have told you about the share structure of FRVT and reasons for impending interest in this company, but what in the heck do they do? Do you remember CMGI from the internet heyday? FRVT is somewhat similar. When you think of FRVT, think of a stock incubator. FutureVest makes strategic equity and equity-related investments in small and medium-sized companies in a variety of industries worldwide. The company relies upon a focused investment criteria, early stage funding opportunities, and potential exit strategies before any investment is initiated. FutureVest's two operating divisions, Capital Investments and Venture Services, allows the Company to enter an investment at the earliest possible stage and assist in the management of the investment to ensure the goals of FutureVest are met. The operating divisions also ensure that maximum returns are achieved for shareholders.
FutureVest not only invests in prospective companies, they also serve as active directors of their portfolio companies by working closely with, and in support of, management. FutureVest believes that thier relationship with entrepreneurs is based on a partnership whose ultimate goal is building a successful business. This partnership enables FutureVest to work with their management teams to deliver superior returns to shareholders.

Let's look at some of the companies in FutureVest's portfolio:

Company #1: IZECOM. Secure, encryptable email technology. IZEMAIL enables companies and individuals to protect incoming and outgoing e-mail. IZEMAIL is based on PKI ('Public Key Infrastructure'), which is a standard for e-mail and web protection, adopted by the EU and by most governments. Izemail encrypts e-mail messages and signs them with a digital signatures ('certificates'). These certificates are included with Izemail, or you can use your own certificates. Izemail works within your current e-mail infrastructure. There are Izemail plugins for Outlook, Lotus Notes and other e-mail programs, and there is a server version for encrypting and/or decrypting e-mail on the server, between the firewall and the virusscanner and spam filter. Combined use of desktop Izemail and server Izemail is possible.

One very exciting product from IZECOM is its S/MIME encryption product for the Blackberry by Research in Motion (NASDAQ: RIMM). Izemail for Blackberry in conjunction with the Blackberry mobile device allows a user to read S/MIME encrypted email on the handheld device. This should be a HUGE product for IZECOM. As Blackberries are almost exclusively used for business purposes, the demand for encryptable email applications could be tremendous. Personally, I would be willing to bet that RIMM will eventually acquire IZECOM from FutureVest for inclusion of its encryptable email technology into its Blackberry products.
IZECOM does much more than email encryption. For more information, check out their website

Company #2: CipherPass. CipherPass delivers data protection solutions that help enterprises and individuals protect their most valuable digital assets.
CipherPass’ C~suite product line provides the last bastion of data assurance for confidential information. By leveraging your existing business applications, C~suite provides an additional level of protection that is simple to use, very secure and affordable. Headquartered in Santa Monica, California, CipherPass also has operations in Toronto, Canada.
CipherPass trades on the Pink Sheets under the symbol CPHC.

CipherPass clients include:

The city of Beverly Hills, CA
MedicalSuite Consulting and Technologies, LLC
GeoTrust, Inc.
Contego Information Security Services
QD Technology
For more information check out the CipherPass Webiste

Company #3: SolutionNet. SolutionNET is a global company providing IT consulting and services in diverse application areas.SolutionNET consistently delivers quality software solutions to a discerning clientele through its offices in the US, Australia, Singapore, Malaysia, Middle East, and India.
SolutionNet provides online banking serives, e-Remittance, e-Insurance, and more. The company has an extensive list of high profile clients including:

Corporation Bank
ING Vysya Bank
BNP Paribas
Canbank Factors Limited
Hindustan Lever Limited
Brakes India Limited
Qatar National Bank
Bank of Bahrain and Kuwait
Shamil Bank of Bahrain
El-Khalifa Bank
Deutche Bank
Standard Chartered Bank

For more information check out the SolutionNET website

If you are like me, you are excited about FutureVest. FutureVest has an extremely small float, tight control of their shares, and a robust portfolio. Each company in the FRVT portfolio looks outstanding and has a bright future. When these companies grow, FutureVest benefits as they own a majority interest in each company. In addition to the solid FRVT foundation, there is the aforementioned rumor info...

As always, please see my disclaimer

Saturday, November 04, 2006

Small Floats = BIG Gains

The formula is simple...high demand and low supply leads to increased prices. That simple formula is the basic premise behind trading small float stocks. When there are few shares to go around, any demand for those shares will cause the price of the stock to skyrocket. If you couple a small float with a stock that has a very inexpensive share price, you have a the makings of something magical. Add a little bit of volume to that inexpensive low float stock and you will see an explosion!

How does a 900% gain in one day sound? It may sound ludicrous to some, but this was an actual gain for a small float stock as recently as last week! (see example 1 below)

Here is a small float stock to watch for next week. Walker Financial (OTCBB: WLKF) fits the small float billing perfectly. According to its most recent 10-QSB SEC filing, there were a total of 15,945,220 shares of the registrant's common stock, par value $.0001 per share, outstanding as of August 8, 2006. Of those 15.9 million total shares, 9.8 million shares are in the public tradable float. There have been NO INSIDER SALES of WLKF since December of 2005, and that sale was a measly $1,100 worth of stock. So, we have a stock with a small float and have satisfied ingredient number one. Now let's look at ingredient number two. WLKF has a ridiculously inexpensive share price of only 1.5 cents!

Can you believe that? A share price of only 1.5 cents gives WLKF a market cap of only $239,170! That market cap does not equal 1/4 of WLKF's anticipated yearly revenues! When you consider the fact that most stocks have market caps of 2-5 times their yearly revenues, WLKF has alot of room to grow!

We now have 2 of the ingredients for a stock price explosion for WLKF. The stock has a very small float of only 9.8 million shares. The stock is inexpensive at only 1.5 cents. Now, the only ingredient left to ignite this explosive stock is volume. Add a little volume to WLKF and this stock will catch on fire! It won't take much to get this stock moving. At its current share price, a mere $15,000 will create 1,000,000 shares of volume! Think about this...less than $150,000 in total volume would be enough to trade all shares in the float at WLKF's current price! A few days ago, $58,000 worth of WLKF traded hands and the stock rose 66% intraday. If this stock were to see, say, $500,000 worth of trading volume, the gains could possibly be 200-300%. $500,000 is not a number that is too far fetched. CKYS, a stock that at 2.4 cents is just a shade more expensive than WLKF, has been recently seen trading volume anywhere from $400,000 to $900,000.

To see what is possible for WLKF, look at example 1. Metropane (Pink Sheets: METP) is a stock with a small float like WLKF. In two trading days, this stock rose an amazing 900%! I would also like you to look at examples 2 and 3. These two stocks don't have small floats, but they do have share prices that were similar to WLKF prior to their runs. Both stocks easily achieved 100% gains despite their large floats. When you consider the fact that WLKF's float is anywhere from 7-10 times smaller than the floats for the stocks in examples 2 and 3, you can't help but to get excited!

WLKF has 2 of the 3 ingredients necessary for a price explosion. Take a look at the following examples to see what is possible with small float and low priced stocks. Pay particular attention to example 1 as the stock had a share price and float number that is somewhat similar to that of WLKF.

Example 1: Metropane Inc (Pink Sheets: METP)
Share Price Run: $0.008 - 0.08
Shares Outstanding: ~12,000,000 shares
Shares in Float: ~7,000,000 shares

When I look at Metropane, this is what I envision with Walker Financial. METP has a similar number of shares in the float as WLKF. METP has ~ 7 million shares in the float while WLKF has 9.8 million shares in the float. Over the past week, METP ran from lows of $0.008 to a high of $0.08 for a potential gain of 900%! Most of this gain took place on Monday and the gains lasted throughout the entire day. Similar gains could happen for WLKF with a little volume.

Example 2: Cyberkey Solutions (Pink Sheets: CKYS)
Share Price Run: $0.012 - 0.033
Shares Outstanding: ~580,000,000 shares
Shares in Float: ~180,000,000 shares

Let's take a look at the recent performance of Cyberkey Solutions. Over the past few weeks, this stock has run from $0.012 to a high of $0.033 for a potential gain of 175%. CKYS has an an estimated 580 million shares outstanding and a public tradable float estimated at 180 million shares. The float for CKYS is 10 times greater than the float for WLKF....10x! If you look at the trading volume for CKYS, you can see that it steadily increased and reached ~7X normal trading volume during its biggest spike.

Example 3: Global Diamond Exchange (Pink Sheets: GBDX)
Share Price Run: $0.012 - 0.033
Shares Outstandig: ~350,000,000 shares
Shares in Float: ~75,000,000 shares

Let's take a look at the recent performance of Global Diamond Exchange. Over the past few weeks, this stock has run from $0.015 to a high of $0.032 for a potential gain of 113%. GBDX has an an estimated 350 million shares outstanding and a public tradable float estimated at 75 million shares. The float for GBDX is 7.5 times greater than the float for WLKF....7.5x! If you look at the trading volume for CKYS, you can see that it steadily increased and reached ~7X normal trading volume during its biggest spike.

External disclaimer was removed broken link stockdoconline.com
*** If you liked this article on small floats leading to big gains, you will love The Little Black Book of Microcap Investing by best selling author Dan Holtzclaw. This book is the current #1 selling microcap book on Amazon.com Get it today for up to 40% off!

Sunday, October 29, 2006

High Fashion = High $$$

Dan Holtzclaw here, author of The Little Black Book of Microcap Investing, the current #1 selling microcap book on Amazon.com. I have an update for you on a microcap stocks that could see some substantial action this week.

Gucci...True Religion....Prada....BCBG....Coach....Chanel. These names are synonymous with $250 jeans, $300 shoes, $500 handbags, and $600 dresses. Without a doubt, high fashion translates into high dollars! When one thinks of high fashion, the OTCBB does not come to mind. There is one OTCBB company, however, that is attempting to make a mark in the high fashion scene.

Skins (OTCBB: SKNN) will soon release a highly anticipated new shoe that has already created a buzz in the fashion industry. The Skins shoe is comprised of an orthopedic insert that can be covered with a number of interchangable "skin" covers. The concept is completely revolutionary and highly intriguing.

While most of the fashion industry is excited about Skins for its ultra-chic shoes, I am excited about Skins for a different reason. As you know, I have been mentioning that 1 million mailers advertising SKNN were going to hit the streets. According to my sources, the 1 million SKNN mailers are in the mail and should be arriving to potential investors this weekend. These 16 page full color mailers are sure to attract some attention for SKNN stock! Think about it. 1 million mailers. That is a ton of exposure! If only 0.1% of the mailers attract new investors, that translates into 1,000 new investors! Therefore, in the short term, I am anticipating that SKNN stock will see significant appreciation from this exposure.

Companies that have used mailers for promotion in the past have seen substantial gains. Take RBSY for example. Earlier this year, full color mailers similar to the ones going out for SKNN went out to the investing public for RBSY. RBSY rose nearly 1000%! It is easy to see why I like SKNN in the short term. But there is more to the SKNN story.

It appears that SKNN has been ramping up their exposure in preparation for the launch of their highly anticipated product line. SKNN shoes may soon join the ranks of other high fashion digs such as True Religion Jeans, Coach, Chanel, Cole Haan, and Gucci. High fashion insiders have already taken note of SKNN's ultra-chic footwear. The Tobé Report, one of the fashion industry's most respected publications, has featured SKNN footwear in The BUZZ section of their September 2006 issue. SKNN shoes are mentioned right alongside with Neiman Marcus! If The Tobé Report is talking about SKNN, you can bet that other high fashion executives have also taken note as well. Click here to see the The Tobé Report with SKNN.

Others in the press have taken note of SKNN as well. The renowned design magazine Azure recently featured SKNN footwear in their July/August 2006 issue. Click here to see Azure.

Finally, Footwear Plus, the footwear industry's leading magazine featuring the latest in cutting edge design and modern trends, has featured SKNN. The magazine noted that SKNN products created a "buzz" at the WSA Show. The WSA Show is the largest and most comprehensive marketplace for global footwear, handbags and accessories industries. If SKNN was creating a buzz here, you know it is going to be special! In fact, one long time industry insider called SKNN footwear "exciting and refreshing" and noted that he thought that they "will fly." To read the Footwear Plus article, click here.

Monday may be the last opportunity to acquire SKNN stock for under $1.30. SKNN could easily replicate the success of True Religion jeans. Just a few short years ago, True Religion was an OTCBB stock just like SKNN is now. Had you invested $5,000 in True Religion in 2004, your initial investment would now be worth over $100,000!


As always, please see my disclaimer.

Tuesday, October 24, 2006

HAL: Who Is Celebrating?

We all like to see the underdog win. We loved to watch Seabiscuit run to victory in the movie named in his honor. We loved to watch as the humble yet charming "Jack" stole Rose away on the greatest ship ever made. These are happy endings. A happy ending is in the eye of the beholder, however.
Halliburton (NYSE:HAL) announced consolidated revenue was up $5.8 billion in the third quarter of 2006. This is increaded 19% from the third quarter of 2005. There is celebration by Dave Lesar, president of Halliburton. There was porbably celebration in the Cheney household as well. We have to ask ourselves at what cost is Halliburton stock doing so well? Would the stock be doing well without the war? The more of a mess the war becomes, the better the outlook for Halliburton stockholders. This is a grim outlook for the underdog.

Sunday, October 15, 2006

SKNN, the next CROX?

I have a very interesting pick for you with Skins Foot Wear (OTCBB: SKNN). This stock is a potential winner on 2 fronts:

As a short term play, SKNN may pop on the heels of a 1 million piece informational mailer that is supposed to hit the streets later this week. The hardcopy mailer is 16 pages long, full color, and loaded with exciting information about the company. With 1 million mailers going to targeted small cap investors, SKNN may see some significant action. Think about it, if only 0.1% of the mailers draw in new investors, that is 1,000 new investors to the stock! The average volume for SKNN is relatively low at 42,000 shares, so any influx of new investors could create astounding action for this stock.

As a long term play, SKNN looks very promising. First of all, SKNN's products are truly innovative. There is not another shoe like Skins anywhere! Skins is ready to launch the world's first 2 part interchangeable shoe. With Skins, you buy a single pair of "Bones" orthopedic inserts and then you slip on "Skin" over the bones. Visit the SKNN website for a great visual of how the products work.

Total customization! There are multiple Skins to choose from and they are sure to set the fashion world on fire. Renowned design firm Banfri Zambrelli of Gucci, Coach, Channel, and Bally fame is leading the Skins design team! Bill Priakos, Vice President of Merchandising for the Dallas Cowboys, had the following to say about Skins: "It's innovative and creative, appealing to our sensibilities. Skins has a unique story to tell...retailers and consumers always crave innovation. With those dynamics, you have a winner."

Over the long term, Skins may perform similar to Crocs (NASDAQ: CROX). Just a few short years ago in 2002, CROX had revenue of only $24,000. In 2006, CROX had revenue of just over $200,000,000! CROX and SKNN have a very similar share structure. CROX has 38.7 million shares outstanding while SKNN has 34.4 million shares outstanding. CROX has 24.2 million shares in the float while SKNN has 23.3 million shares in the float. Now, here is the best part of the comparison between CROX and SKNN...CROX has a share price of $38.88 while SKNN has a share price of only $1.18! Can you say HUGE potential!

The management team for SKNN is outstanding! The board is loaded with members who had high ranking positions with industry behemoths such as Kohl's Department Stores, Tommy Hilfiger, Rockport, and Stride-Rite.

If you want more information about SKNN, please contact me. You can also visit the SKNN website. It is one of the most stylish websites that I have ever seen and has great information about SKNN products.


Saturday, October 07, 2006


Have you ever seen a short squeeze? If not, you may soon see one with the stock that I described as "The Easiest Money That You Will Ever Make!" Reliant Home Warranty Corporation (OTCBB: RHWC) is currently poised for a huge potential short squeeze. When I put out the Easy Money story last month, RHWC was trading for 7 cents...yesterday RHWC closed at 18 cents. Were you listening? I sure hope so, otherwise you missed out on some huge gains! Over the past 2 months, I have put out a cornucopia of picks that have all been big gainers. HTRE was up 80%. CKCM was up 52%. TBSI was up 51%. TRID was up 46%. ADAM was up 33%. RADN was up 25%. BRVO was up 22%. You get the point. I found all of these picks with the same strategies that I discuss in my new text The Little Black Book of Microcap Investing. You can grab a copy at Amazon.com.

Anyway, back to the RHWC short squeeze. Over the past few days, RHWC has gained over 157%. That may sound like a huge gain, but you must remember that not too long ago, RHWC was regularly trading above 20 cents. In fact, earlier this year, RHWC traded as high as 44 cents. Since that time, the stock has been heavily shorted and its price has slowly declined. Even when RHWC dipped under a dime, the shorting continued. During RHWC's decline, a multitude of new individual investors entered the stock. Some picked up shares in the 20 cent range while many others picked up shares in the teens and lower. What RHWC now has that it did not have before is a core base of investors. This has led to increased message board activity for the stock and a small measure of recognition amongst penny stock investors. On Wednesday October 4, 2006, RHWC had the 6th most active message board on Ragingbull.com. Without a doubt, investors are starting to take note of this stock.

According to my sources, RHWC is estimated to have a very large short position. Although I cannot confirm this, my suspicion is that there are anywhere from 2-4 million shares shorted for RHWC. When you consider that the actual tradable float for RHWC is an estimated 10 million shares, the short position for RHWC is enormous. With Friday's close at 18 cents, the hedge funds shorting RHWC may get margin calls on Monday. If there is any buying pressure for RHWC on Monday, a serious short squeeze could develop and this stock could see a tremendous spike. You would be wise to keep a close eye on RHWC next week!

Since we are on the topic of shorting OTCBB stocks, let's take a closer look at the subject. According to many investors, short sales are one of the most confusing aspects of microcap stocks. It seems as if the general investing public has no clue as to the rules regarding this matter. To test this theory, I anonymously posted some questions regarding short selling microcap stocks on a few message boards. The responses that I received were quite varied. One respondent confidently informed me that you could not short stocks costing less than $5. Another poster said that it was $4. Many posters flatly stated that OTCBB and Pink Sheet stocks cannot be shorted. My favorite explanation, and this one was definitely the most off-the-wall, was that terrorists were naked short selling US stocks via foreign exchanges in an effort to undermine the US economy! Obviously, there is some definite confusion regarding microcap short selling amongst layman investors. To clear up this confusion, let’s take a look at short selling microcap stocks.

As you all know, I am not an investment professional. I am neither a securities broker/dealer, market maker nor do I work for any type of investment firm. Like you, I am an individual investor. As such, I too had questions regarding the short selling of microcap securities, specifically OTCBB and Pink Sheet stocks. To find some answers, I decided to go straight to the source. First, I called the NASD. Since, according to the SEC, the NASD oversees the OTCBB, I felt that this would be the logical place to start. I called the NASD and a secretary transferred me to the proper department. Of course, no one was available to take my call, so I left a voice-mail. To my surprise, someone from the NASD actually called me back by the end of the day. Unfortunately, this particular NASD representative must have been a summer intern because she had no idea what I was talking about. Each time I asked a question, I could hear her typing on the computer to find the answer on the NASD website. As expected, this person could not answer any of my questions and with each query I was informed to visit the NASD website. I politely informed the rep that I had already visited the NASD website and that I had additional questions. Eventually, the rep gave up and told me to call the SEC. Wow, that was a lot of help! By sheer coincidence, I just happen to live just a few short miles from the NASD’s Rockville, Maryland office. I thought that if I went to the NASD in person, maybe someone could provide me with some answers. I drove down to the NASD offices and requested to speak to someone regarding the short selling of OTCBB securities. An NASD employee asked if I was part of an NASD member firm. Upon hearing my negative answer, the NASD employee told me that since I was not a member of an NASD firm, no one could help me. They did, however, provide me with a phone number to an NASD department that could answer all of my questions. Guess what the phone number was? It was the number to the summer intern!

Well, my NASDexperience was a bust so I took the summer intern’s advice and called upon the SECfor help. I gave the SEC a buzz and reached the ubiquitous secretary. Like the NASD secretary, the SEC secretary thanked me for calling and transferred my call to the “correct” department. The “correct” department must be a secret code word for voice mail because that is exactly what I got. As instructed by the soothing computer generated voice, I left my message with a number where I could be reached. Guess what….I am still waiting for that SEC phone call. I guess they don’t have time to talk to the common man. I thought about heading down to D.C. and paying the SEC a personal visit, but I figured it would be a fruitless endeavor and, besides, the Metro trip costs five bucks. Thanks for the help guys! Even if I was able to talk to someone down at the SEC, I am sure that I would have been given the standard company line of “Go check the website.”

I’ll tell you what, just for grins, let’s check out the SEC and NASD websites to see if they can answer the mysterious questions about short selling microcap securities. First up is the SEC website. Some documents on the SEC website are actually fairly helpful. Regarding short sales, the SEC website notes that a short sale occurs when an investor sells a stock that he or she does not own. To do so, the seller borrows shares from their broker and sells them at the current bid. The seller must then cover their short position at a later date by purchasing shares of the short sold stock. Logically, the short seller anticipates that the price of the stock in question will decline and that they will be able to purchase to cover their short position at a lower price.
The SEChas long recognized that unregulated short selling can undercut the price of a stock and lead to manipulative trading strategies such as “bear raids.” In such situations, a concerted effort is made to short a stock with the intent of creating significant downward momentum to negatively affect market sentiment towards the security. As this occurs, many investors will have stop-loss orders triggered leading to a further decline and others will eventually capitulate with panic selling. To deter such beguiling practices, the SEC adopted rules and regulations that attempt to control short selling. SEC Rule 10a-1 of the Securities Exchange Act of 1934introduced provisions commonly referred to as “tick tests” in an effort to thwart short selling in a declining market. With such tests, stocks may only be sold short on a “plus tick” or on a “zero plus tick.” A plus tick occurs when the price of a short sale executes at a price higher than the most immediate preceding sale while a zero plus tick occurs when the price of a short sale executes at a price equal to the most immediate preceding sale so long as that price was higher the next immediate preceding sale. While this SEC rule applied to most exchange listed securities, they did not apply to NASDAQ listed stocks. The NASDremedied this situation in 1994 with the implementation of Rule 3350, commonly referred to as the “bid test”. Similar to SEC Rule 10a-1, NASD Rule 3350 prohibited short sales in NASDAQ securities at prices equal to or lower than the current best bid when that bid was lower than the most immediate best bid price. In essence, both the bid and tick tests prevent short sales during declining market conditions. Unfortunately, these rules do not apply to OTCBB or Pink Sheet stocks.

Allright! We are making some definite progress in our quest to learn about short selling microcap stocks. To be quite honest, I must admit that the SECwebsite was quite helpful. For this I say, “Kudos to you SEC!” Now let’s see what we can find on the NASD website. I am feeling pretty confident with this one. The NASD homepage boldly states, “We believe that the most potent form of investor protection is investor education.” Well that sounds pretty good. Let’s see if the NASD can educate us. I visit the investor information page and click the frequently asked questions link. This link says that I can get answers to commonly asked questions, so let’s see if “short selling microcaps” is one of them. The top ten most commonly asked questions pop up and eight of the ten questions deal with information for professional brokers. No information on short selling here. Let’s use the search tool and see what happens. I do a little bit of sleuthing and I come up with NASD Notice to Members 06-28-June 2006: SEC Approves New Rule 3210 Applying Short Sale Delivery Requirements to Non-Reporting OTC Equity Securities; Effective Date July 3, 2006. Alrighty then! Now we are talking. Let’s see what this update has to say:

“On April 4, 2006, the Securities and Exchange Commission (SEC ) approved new Rule 3210, Short Sale Delivery Requirements, which applies short sale delivery requirements to those equity securities not otherwise covered by the delivery requirements of Regulation SHO, namely non-reporting OTC equity securities.1 Rule 3210, among other things, requires participants of registered clearing agencies to take action on failures to deliver that exist for 13 consecutive settlement days in certain non-reporting securities. In addition, if the fail to deliver position is not closed out in the requisite time period, a participant of a registered clearing agency or any broker-dealer for which it clears transactions is prohibited from effecting further short sales in the particular specified security without borrowing, or entering into a bona-fide arrangement to borrow, the security until the fail to deliver position is closed out.”

Okay, now we are getting somewhere. Rule 3210 essentially applies the delivery requirements of Regulation SHO to OTCBB and Pink Sheet stocks. So, what in the heck is Regulation SHO? Back to the NASD search feature. Ah yes, here we go, Regulation SHO. Wow, my query returned a paltry 3,642 documents. That should be easy to navigate! A little more searching and I find some information on Regulation SHO.

“Regulation SHO, among other things, imposes uniform delivery requirements on broker-dealers for certain securities that have a substantial level of failures to deliver at a registered clearing agency, referred to as “threshold securities.” Regulation SHO requires broker-dealers that are participants of a registered clearing agency (clearing agency participants) to take action to “close-out” failure-to-deliver positions in threshold securities that have persisted for 13 consecutive settlement days by purchasing securities of like kind and quantity.”

With the implementation of Regulation SHO, the SEC has consolidated locate and close-out rules related to short selling. Rule 203 of Regulation SHO requires broker-dealers executing a short sale to locate securities to borrow before selling and requires broker-dealers to maintain documentation of their compliance with this rule. Additionally, Rule 203 of Regulation SHO also imposes delivery requirements on broker-dealers for securities in which a substantial number of failures to deliver have occurred. This rule requires brokers to close out positions for which they are responsible in securities designated as “threshold securities” after ten consecutive days. If a clearing broker has a fail to deliver position for thirteen consecutive settlement days, said broker is prohibited from executing short sales until the locate requirement is fulfilled.
According to the SEC, “Regulation SHO provides a new regulatory framework governing short selling of securities. Regulation SHO is designed, in part, to fulfill several objectives, including (1) establish uniform locate and delivery requirements in order to address problems associated with failures to deliver, including potentially abusive “naked” short selling (i.e., selling short without having borrowed the securities to make delivery); (2) create uniform marking requirements for sales of all equity securities; and (3) establish a procedure to temporarily suspend Commission and SRO short sale price tests in order to evaluate the overall effectiveness and necessity of such restrictions.” Blah, blah, blah. The documents regarding Regulation SHO go on for days on end. As an added bonus, they are peppered with language only a lawyer could love.

In my quest to dig up information on Rule 3210 and Regulation SHO, I found this interesting tidbit of information. Reports on the web regarding a recent meeting of the Securities Industries Association(SIA) noted that the SIA was successful in its bid to significantly weaken Regulation SHO. It was reported that the SIA fought tooth and nail to oppose language in the regulation that would have required its members to locate and contractually borrow a security prior to executing a short sale. Instead, the language of Rule 203(b) “creates a uniform Commission rule requiring a broker-dealer, prior to effecting a short sale in any equity security, to "locate" securities available for borrowing.” The language of the rule also states that a broker/dealer can execute a short sale so long as they have “reasonable grounds to believe that the security can be borrowed so that it can be delivered on the date delivery is due.” I don’t know about you, but that type of language sounds like it favors the investment professionals and reduces protection for the common man.

A few paragraphs ago I mentioned a “threshold security.” What in the heck is a threshold security? Regulation SHO Rule 2003(c)(6) defines a “threshold security” as any equity security of any issuer that is registered under Section 12 of the Exchange Act, or that is required to file reports under Section 15(d) of the Exchange Act (commonly referred to as reporting securities), where, for five consecutive settlement days: There are aggregate fails to deliver at a registered clearing agency of 10,000 shares or more per security, the level of fails is equal to at least one-half of one percent of the issuer’s total shares outstanding, and the security is included on a list published by a self-regulatory organization (SRO). The NASDAQ publishes a Regulation SHO Threshold Security Listfor NASDAQ-listed issues, OTCBB issues, and Other-OTC issues on each settlement day prior to midnight, Eastern Time. Additionally, in support of NASDRule 3210, the NASDAQ, as the NASD’s service provider, will expand the Regulation SHO Threshold Securities List to include non-reporting OTC equity securities (Pink Sheet stocks) effective July 11, 2006. The list can be viewed at the following link: http://www.nasdaqtrader.com/aspx/regsho.aspx

On June 14, 2006 there were 166 stocks on the Threshold Securities List. As expected, many of the stocks on this list were OTCBB securities, but there were a surprisingly high number of NASDAQ securities as well.

One final item to note on the NASD website regarding the short selling of microcap securities is NASD Notice to Members 06-14-April 2006: SECApproves Amendments to the Short Interest Reporting Requirements; Effective Date July 3, 2006. According to this notice, the SEC has approved amendments to Rule 3360expanding short interest reporting requirements to OTC equity securities. Prior to this amendment, Rule 3360(a) required NASD members to maintain a record of total short positions in all customer and proprietary firm accounts in only NASDAQ securities and required members to report such data to the NASD on a monthly basis. Reporting for OTC securities was not required. For the purpose of this rule, OTC equity securities are defined as any equity security that is not listed on the NASDAQ or a national securities exchange. As the OTCBB and Pink Sheets are technically not exchanges, Rule 3360 previously did not apply to these stocks. Now, with the approval of the amendment to Rule 3360, NASD member firms will be required to report their short positions for OTCBB and Pink Sheet stocks.

Well, I guess the NASD summer intern was correct. You can find information regarding short selling microcaps on the NASD and SECwebsites, but I hope you have a lot of patience and a penchant for legalese. Although I never found a direct answer to my questions, it is apparent that shorting of microcaps including OTCBB and Pink Sheet stocks is definitely allowed. While this is true for the investing professional, most of us common folk are prohibited from shorting these stocks via restrictions from our brokerage firms on marginable trades. Federal Reserve Regulation T requires investors to utilize margin accounts to post collateral for short sales. Most brokerage firms use this regulation to prevent investors from shorting most microcaps. E-Trade, for example, reports that stocks under $2 are not marginable. Schwabb reports that marginable stocks must be traded on a major exchange and cost $3 or more. Scottrade reports that stocks costing less than $5 are not shortable. In effect, by imposing regulations on marginable accounts via minimum pricing and exchange membership requirements, most brokerage firms have indirectly prohibited the common man from shorting the majority of microcap stocks. Each brokerage firm has their own rules and regulations regarding the short selling of securities, so be sure to check with your broker for specifics.

Naked Short Sales

Now that we have discussed short selling microcap stocks, let’s turn our attention to a subject that is even more mysterious and controversial…naked short selling. Nearly every penny stock investor has heard about naked shorting. In fact, if a penny stock begins to tank, you will undoubtedly see someone posting that the stock is being killed by naked shorting. Just what exactly is naked shorting? To find out, let’s check back with our friends at the NASD. During my conversation with the alleged summer intern, I posed a question about naked shorting. Once again, the rep could not answer my question. She kept babbling on about short selling rules (as she read them off of her computer screen), but could not answer any of my questions about naked shorting. To be honest, I don’t think she knew what naked short selling was! Clueless…simply clueless. I gave up that line of questioning and decided to check the NASD website. Utilization of the search feature returned 1,704 documents when the words “naked shorting” were queried. Of course, none of the documents I examined specifically dealt with naked shorting directly and if they did mention anything about it, the information was buried deep within the confines of the document. I did find an NASD document stating “NASD rules restrict naked short sales, that is selling a stock short without ensuring that the stock can be borrowed or otherwise provided for by settlement date, also known as an affirmative determination.” For all intensive purposes, the NASD provided me with little answers for my research on naked shorting. Once again, thanks for the help guys.

Since my NASD search proved relatively fruitless, I turned to the SEC for assistance. As you might have guessed, my attempts to talk with an actual human being associated with the SEC were nonproductive. I, therefore, attempted to utilize the SEC website. By making use of the search feature on the SEC website, my query for naked shortingreturned 1,100 documents regarding naked shorting. Unlike the NASD website, however, the SEC website ranked these documents in order of relevance and some of the documents were easy to read and went right to the point. My review of the documents on the SEC website noted that naked short selling distorts market pricing by creating artificial supply/demand imbalances that benefit the manipulator. Well, everyone knows that. What we need is more specific information regarding naked shorting. By digging a little deeper, the SEC website noted that naked short sellers have the ability to destabilize the market for a stock due to the lack of enforceable restrictions requiring the actual borrowing of securities prior to a executing a short sale. As such, the inability to borrow said securities creates a “fail-to-deliver” situation. As shares are naked shorted and, therefore, are not actually borrowed, the potential exists for the number of fails in a stock to actually outnumber the public float for the stock. This point is easily demonstrated by the very famous story of Robert Simpson. In early 2005, Mr. Simpson filed documents with the SEC concerning his purchase of 100% of the issued and outstanding stock for the Global Links Corporation. As legend has it, Mr. Simpson stuck all of his Global Links stock in his sock drawer for safe keeping. Despite the fact that Mr. Simpson had every share of this company safely nestled next to his tidy whities, this OTCBB stock still somehow managed to trade nearly 60 million shares in the two days following his SEC filing! Can this really happen? You bet it can!

Tom Ronk, founder of BUYINS.Net, a California based internet firm that researches and reports on companies that are targets of abusive or naked short selling practices, has said that nearly 20% of publicly traded companies have been naked shorted between 2005-mid 2006. According to Mr. Ronk, “BUYINS.Net has built a proprietary database that uses list feeds to generate detailed and useful information to combat the naked short selling problem.” Additionally, Ronk noted that, “…actual trade by trade data is available to the public that shows the volume, price, and average value of short sales in stocks that have been shorted and naked shorted.” According to the website, BUYINS.net utilizes its massive database of nearly 800 million short sale transactions dating back to January of 2005 to calculate “Squeeze Trigger Prices” to alert investors to the exact price point when a short squeeze can start. The Squeeze Trigger database collects individual short trade data on over 7,000 NYSE, NASDAQ, and AMEX stocks as well as general short trade data on nearly 8,000 OTCBB and Pink Sheet stocks. BUYINS.net provides this service for a very nominal fee. To date, BUYINS.net is one of the few services available to investors for combating abusive short selling and naked short selling practices. This website is definitely worth a look. Check it out at http://www.buyins.net/

With such a potentially enormous problem, you would think that the mainstream press would focus more attention on naked shorting. One of the biggest whistleblowers regarding naked shorting has been Dr. Patrick Byrne, CEO of Overstock.com. According to his posts on the Overstock.com message board, Dr. Byrne equates naked shorting to counterfeiting shares. Because the naked short seller does not actually borrow the shares that he is selling, these shares are, in essence, simply made up. As such, there is no limit on how many bogus shares that hedge funds can create. Dr. Byrne presents multiple scenarios as to how naked shorting can occur in our “regulated” U.S. market place. One theory essentially states that a “Good-ole-boy” network exists on Wall Street whereby the Depository Trust and Clearing Corporation (DTCC, the agency that keeps electronic records of who owns which stock at which brokerages, and settles the trading of stocks) and various brokers look the other way for favored clients. A second explanation insinuates that hedge funds will list a U.S. stock on a foreign exchange without the permission or knowledge of the parent company and will utilize this listing to naked short the stock in question. When contacted by the DTCC to locate and deliver the shorted shares, the fund will reference the foreign exchange in an effort to buy time and allow their naked short position to continue. While this sounds quite fantastic, many companies have indeed found their stock to be listed on foreign exchanges without their knowledge. In fact, Dr. Byrne noted that in late 2004, Overstock.com was listed on five German exchanges and one in Australia. None of these listings were ever requested by the company.

When I think about naked short selling, I wonder why it takes the CEO of a large company to bring this matter to the attention of the investing public. The media reports on every detail of a celebrity’s life and runs stories on every minor political scandal, yet they rarely mention a problem that is costing honest investors billions of dollars? I wonder why a private company such as BUYINS.net can research and create lists of naked shorted stocks while regulatory agencies such as the SEC and NASD, which are supposed to protect investors, cannot or will not do the same. Others, it seems, are beginning to wonder the same thing. A recent online survey of nearly 2,500 U.S. adults found that 38% of respondents would be more likely to vote for a congressional candidate that would address the issue of naked shorting. Congress, it seems, is starting to get the message. In a 2005 hearing of the Senate Banking Committee, Utah Senator Robert Bennett questioned former SEC Chairman William Donaldson about the potential shortcomings of Regulation SHO by noting ways that collusive brokers could get around the regulation. Perhaps the issue of naked shorting will receive more attention during the elections of 2006.

Simply put, naked shortingis an illegal practice that may be costing investors billions of dollars. Some reports have estimated that the extent of naked shorting on Wall Street could be up to 100 times greater than the alleged $10.5 billion short position of the disgraced financial firm Refco. While this practice appears to affect stocks of all sizes, microcap stocks tend to be commonly victimized as many are fairly illiquid and make easy targets for unscrupulous naked short sellers. Though the SEC and NASD have recently announced new regulations to improve the environment of short sales, it is obvious that the issue of naked short selling still has much to be addressed.

If you liked this article, you will love The Little Black Book of Microcap Investing. This book is packed with 208 pages of great Nasdaq/Amex microcap, OTCBB Penny Stock, and Pink Sheet Stock information similar to what you have just read. Get your copy today at Amazon.com

Monday, September 25, 2006

MGOF: And Justice for All

MANGOSOFT, INC. of Nashua, NH (OTC: BB: MGOF) announced today that its subsidiary, Mangosoft Intellectual Property, Inc., had filed a civil action earlier this morning alleging patent infringement against eBay, Inc. of San Jose, California. More specifically, the lawsuit is against eBay’s subsidiaries Skype Technologies SA and Skype Software Sarl of Luxembourg. Mangosoft is alleging that eBay’s subsidiaries have infringed upon U.S. Patent No. 6,647,393, and continue to infringe upon it. This patent is apparently on what’s been termed “dynamic directory service”.

So what the heck is a dynamic directory service? That’s a good question. A dynamic directory service is a single data structure that provides both the physical location of directory information around the network and the directory information itself within that structure. Within a network of computer nodes this data structure is distributed throughout the network, and continuously redistributed. This creates a data service that is more versatile and dynamic.

Unless you’re a techie wizard, this probably doesn’t make a whole heck of a lot of sense. It doesn’t make a lot of sense to me anyway. I suppose that is a good thing, as I cannot break any patents on something that I don’t know how to make. Apparently that was not the case with Skype Technologies and Software. My question is, is there anything new left under the sun? Let’s say that two techie geniuses create the same invention on the same day. One of them beats the other to the punch getting the patent; the other has still “created” something. I would be cautious about coming up with a new idea or invention. It might end up costing you in the long run.

Saturday, September 23, 2006

NFL, NBA, HIP HOP Superstars...OH MY!

Dan Holtzclaw here, author of The Little Black Book of Microcap Investing. I have another great find you. Read this article and see what you think. If you want to find great stocks like this, grab a copy of my book. I show you exactly how I find these stocks. You can get it at www.microcapbook.com or at Amazon.com

NFL great Warren Sapp...NBA sensation Ben Gordon...Rapper extraordinaires Juvenile and Juelz Santana. What do these 4 superstars have in common? All are H3 playaz! Sapp, Gordon, Juvenile, and Juelz are H3 financial partners for the H3 Flagship Hip Hop Soda Shop stores. Gordon and Juelz have agreed to be principle partners for the planned Hip Hop Soda Shop on 125th street in Harlem, NY while Sapp has plans to open Hip Hop Soda Shops in Miami, Tampa Bay, Orlando, and Oakland. Juvenile has signed a Personal Services Agreement with H3 that includes an opportunity for the rapper to open 30 Hip Hop Soda Shops in the state of Louisiana over the next three years under an Area Development Agreement.

H3 Enterprises is a unique Pink Sheet stock on many levels. First of all, how many Pink Sheet or OTCBB companies can you name that have bonafide superstars from the sports and entertainment industries actively promoting their products? I'll give you hint...NONE! Usually, if an OTC company does have a celebrity promoting their products, they are ancient history. Seriously, who cares if a television star from the 1970's is pimpin' your goods? This is not the case with H3.

Warren Sapp is a perennial NFL Pro-Bowl player and one of the most feared defensive players in all of football. Sapp has actively promoted his relationship with H3 and the Hip Hop Soda Shop through appearances with CNBC, ESPN, the Sporting News, and radio interviews , and magazine interviews.

Ben Gordon is one of the fastest rising stars in the NBA. In his rookie season 2004-2005, Gordon was named as the NBA's 6th Man of the Year. Other recipients of this prestigious award include NBA greats such as Bill Walton, Kevin McHale, Antawn Jamison, John Starks, and Bobby Jackson. Gordon's relationship with H3 and Hip Hop Soda Shops has been noted by numerous media outlets including the New York Post, UpTownFlavor, and ESPN. In addition to his involvement with Hip Hop Soda Shops, Gordon and H3 have also teamed up to market a white-tea based energy drink called BG7. This delicious high octane drink has been noted by Energy Drink News , the New York Post, and many other media outlets.

Louisiana native Juvenile is one of rap and hip hop's biggest stars. His album 400 Degreez was one of music's biggest selling album reaching quadruple platinum status! He has since followed up that album with a number of other platinum selling efforts. Juvenile's home state of Louisiana was devastated by Hurricane Katrina and the superstar's agreements with H3 allow him to help bring immediate relief and redevelopment programs to the disaster torn area.

Harlem based rapper Juelz Santana is one of hip hop's hottest young talents. His most recent album What the Game's Been Missing, released in November 2005, reached the Top 10 of the Billboard Album Charts and is certified Gold. Juelz is very active in his promotion of the Hip Hop Soda Shop and has been featured in media outlets such as Vibe Magazine and a number of hip hop press and websites.

H3 is providing a means for many successful African Americans to give back to their community. Juelz noted, "... we're gonna get a chance to actually work together for the good of our own hood." while Sapp said, "The Hip Hop Soda Shops can be one of the most positive things to ever happen to our communities...I can't think of a better way of giving back than putting my money to work on my own turf for my own people while helping H3's powerful new enterprises flourish all over the world."

In addition to the Hip Hop Soda Shops and Ben Gordon's BG7 energy drink, H3 is also offering the latest in online gaming and entertainment with H3Players and its own line of clothing and merchandise.

According to H3, the exploding popularity of Hip Hop and the Hip Hop culture will maximize merchandising and retailing opportunities, particularly for H3’s own merchandise lines. Simmons Lathan Media Group (SLMG) estimates that 45.3 million consumers are now spending $12.6 billion a year on Hip Hop media and merchandise worldwide, with an annual growth rate exceeding 100%. HTRE will capitalize on this insatiable appetite for everything Hip Hop with a large merchandising area in each location featuring exclusive merchandise lines from H3 and Juvenile, as well as two exclusive lines that can be chosen by the owner/operator of each particular location. The developers and franchisees will also have the ability to choose up to 50% of the media sold and the music played inside their Soda Shops.

In addition to its superstar partners, H3 also has an outstanding management team in George Lois, Brian Peters, Jackie Robinson, Steve Staehr, and Jamar McNeil.

Marketing icon George Lois is the most creative, prolific advertising communicator of our time. Best known for his breakthrough cultural transformations, Lois made a failing MTV a media powerhouse with his legendary “I Want My MTV” campaign, turned unknown Tommy Hilfiger into an instant celebrity with the placement of a single newspaper ad, created new marketing categories with his names and ads for Lean Cuisine and Jiffy Lube, and changed the viewing habits of America’s sports fans with his “In Your Face” campaign for ESPN. Lois is the author of five classic books, including the recently published $ellebrity (a Time Warner book) and is the only person ever inducted into all three marketing related Halls of Fame, (Art Directors, Graphic Arts, and Copywriters).

Brian Peters is an award winning HipHop impresario whose Halls of HipHop concept stole the show and won top prize in Visa and Bank of America’s “Best New Business Concept 2004” in Washington D.C. At 25, he has become a legend of New York HipHop starting as an intern for Bad Boy Entertainment under the tutelage of Sean “P. Diddy” Combs. He has created and promoted concerts for colleges and universities around the USA, and has arranged live performances in New York City for many of HipHop’s top performers and most well-known clubs. He has also negotiated performance contracts for a number of platinum selling artists including Outkast, Nas, and Snoopdogg.

In his storied athletic career, Jackie Robinson achieved the status of All-American, World Champion, and Hall-of-Famer. After applying the same athletic disciplines and dedication to a series of extremely profitable business ventures, Jackie landed a spot in Black Enterprise Magazine’s “Top 100 Business People” (#51), a list that includes the likes of Oprah Winfrey and Bob Johnson. Jackie is currently the owner/operator of 53 franchised Pizza Hut Restaurants, as well as a number of News & Gift stores and several highly successful eating establishments inside Las Vegas’ McCarran Airport. He has also created and developed his own record label (SLV), was a senior executive for the Aladdin Hotel Casino for eight years, and served 10 years as CEO for the largest administrator of Federal Tax Credit programs in the state of Nevada.

Jamar (J Niice) McNeil is a multi-award-winning radio personality who has been H3's driving force from the beginning. Battle-tested in the music industry, Jamar has been heard on Clear Channel's HOT 99.5 in Washington D.C. As a popular DJ he has hosted extravagant events in the DC metro area with premier artists such as Jay Z, Beyonce, Beenie Man, and the Black Eyed Peas. He's now taken his show, "In the Crib With J Niice" from the east coast to the Midwest airwaves at Clear Channel's 96.5 Kiss FM in Cleveland, Ohio. Jamar is also the morning show personality for X 107.1, Cayman Islands’ #1 Hit Music Station, and has also worked at XM Satellite Radio. His connections in the radio and music industry have given him the opportunity to build lasting relationships with many of the top stars of Pop and Hip-Hop. He will utilize these contacts, along with H3's other major connections, to coordinate a continuous flow of public relations and promotional opportunities for the company.

Staehr brings a distinguished financial management background in the gaming, tourism and entertainment industries. A certified public accountant licensed to practice in Nevada and California, Staehr will be responsible for handling all aspects of financial accounting and SEC reporting for H3Enterprises. He joins H3Enterprises from Cash Systems Inc., where he served as corporate controller for the $100 million company that provides cash services for the gaming industry. He coordinated the relocation of the company's headquarters from Minneapolis to Las Vegas, and will put these skills to use on H3Enterprises' move from New York City to Las Vegas, as well.

Shares of H3 stock (Pink Sheets: HTRE) have recently tumbled from a high of $0.78 to a low of $0.13. This is certainly a "Blood in the Street" stock...a good stock at ridiculously low prices. Additionally, H3 is reported to have a very large short position. Of the 76 million outstanding shares, 5.9 million shares are estimated to be shorted. With any amount of significant volume, HTRE could easily experience a huge pop with a short squeeze.

If you like the analysis presented here, you will absolutely LOVE The Little Black Book of Microcap Investing! This book is full of information similar to what you just read. If you want to make money with high potential stocks such as HTRE, you need to buy this book. Get it at http://www.microapbook.com or Amazon.com

Monday, September 18, 2006

What IS In A Name?

This post is an update on a post I had made earlier concerning Marshall Field’s (MF) and Macy’s. As most of you know, Macy’s bought our MF. The MF in our neighborhood maintained its name. I thought this would last indefinitely. It seemed to me to be a good idea. I considered it a smart business move. As a loyal MF customer, I didn’t mind shopping in Macy’s as long as the MF name was still on the outside of the building.

Imagine my surprise when I went on my last shopping venture to what I expected to be MF! Hanging where the MF logo used to be was a big, red, gaudy Macy’s sign. Uh-oh. I was concerned. I went into the store a little apprehensive but the big gaudy sign did not prepare me for I would find there. Everything had been changed around, and rearranged. I couldn’t find anything where it used to be. Some of the brands were names I had never heard of before and they didn’t have that classy MF look. Others were so outrageously priced I didn’t dare try them on. I looked at the sale racks, where I used to find my best deals, and I found nothing. I carefully walked through every department in the store and found a similar state of chaos in each department. What had they done to my MF? The best parts of the store had been obliterated.

That was honestly my personal experience, and my opinion. Was it correct? Possibly not; I’ll tell you why. A self-fulfilling prophecy is a psychological phenomenon in which we make a prediction based on our own biases and emotions and then we look for evidence to or subconsciously fulfill our prediction. Another example is telling your self, “I’m going to have a horrible day at work today”. You then go to work with a bad attitude and purposefully have a horrible day. The Macy’s sign was like that. I saw it, and I thought, “this store is not going to be the same”. I went in with the expectation that everything was going to be messed up. Guess what I found?

That leaves me to the question of, what really is in a name? Yahoo! Inc. (Nasdaq:YHOO) and Acer Inc. announced a strategic partnership to distribute a co-branded toolbar and start page and to set Yahoo! as the default search engine on all Acer PCs sold globally. Acer is the world’s number four branded personal computer vendor, and the deal with cover a few years. The Yahoo name and Acer name will be co-mingled as Acer owners will see the Yahoo homepage each time they turn on their computers. It seems like everyone who has a computer to turn on knows what Yahoo is. I had never heard of Acer. It sounds like this is about to change. If Yahoo’s self-fulfilling prophecies are true, this name game could be huge.

Saturday, September 16, 2006

Expect BIG Gains on the OTCBB Soon!

Hey guys, Dan Holtzclaw here, aka the "Stock Doc". Just in case you don't know me, I am the author of the Best Selling Book "Penny Stocks: The Next American Gold Rush" and the newly released book titled "The Little Black Book of Microcap Investing" available at www.microcapbook.com and at Amazon.com I am new to the PennyMarkets Blog. My goal is to give you folks a different spin on microcap stocks.

From my years of observing the markets, I am convinced that the majority of OTCBB and Pink Sheet investors come from NASDAQ minded individuals. This makes sense as those who invest in the NASDAQ tend to be tolerant of stock volatility and more apt to invest in lesser known equity securities. If you compare charts from the NASDAQ and OTCBB you will see that OTCBB activity tends to parallel NASDAQ activity. As I have postulated before, when times are good on the NASDAQ, it is my belief that investors often take some of their profits and stick them in OTCBB stocks. This was clearly evident in 1999-2000, when both the NASDAQ and the OTCBB were at their peaks, and may be happening again now. As I am writing this, the NASDAQ is approaching levels that have not been seen since 2001. When the NASDAQ made steady gains for the majority of 2003, dollar trading volume for the OTCBB followed suit a few months later. Again, it is my belief that most investors first make their money on the NASDAQ and then stick some of it in the OTCBB…hence the delay between activities amongst the two markets.

Take a few minutes to compare the charts of the NASDAQ to OTCBB dollar volume statistics. The OTCBB website contains data on market statistics for the over the counter market. In the market statistics subheading, you can find information on share volume, dollar volume, total transactions, etc. I personally don’t like the charts provided on the OTCBB website, so I download the data into an excel spreadsheet. This allows me to create various charts for comparison and analysis of market trends. When looking at OTCBB market data, I like to look at total dollar volume to get a feel for overall market conditions. Dollar volume lets me know the “pulse” of the market. It is real data. Total share volume can be misleading because you don’t know the price at which most tradable OTCBB stocks are moving. For example, a one cent stock may trade 2 million shares in a single day, but that only translates into $20,000…chump change for most large market stocks. The bottom line is how much cash is entering the market. More investors mean more money entering the market. More investors and more money means that more stocks are going to move. More stock movement means more opportunity for trading activity. More trading activity means more opportunity to make money with a stock. Can you see the value of monitoring total dollar volume?

While OTCBB dollar trading volume gains tend to lag slightly behind gains in the NASDAQ, decreases in the NASDAQ influence the OTCBB much faster. When times are bad, investors tend to eliminate their riskiest investments first. As such, if the NASDAQ is declining, the first things to go for most investors are their OTCBB investments. This trend was clearly evident for most of the year 2005. From January to May of 2005, the NASDAQ took a breather and experienced a general downtrend. As this occurred, investors likewise withdrew from the OTCBBand dollar trading volume declined. From May to July of 2005, the NASDAQ once again surged upwards and, as expected, OTCBB dollar trading volume began to follow suit. Unfortunately, just as the OTCBB began its positive dollar volume run, the NASDAQ once again corrected and the OTCBB rally died. From August to October of 2005, the NASDAQ experienced a minor correction and, as expected, the OTCBB lost dollar volume. In general, 2005 OTCBB dollar volume was mired in a downward trend generated from the January-May and August-October NASDAQ corrections.

It is well known that the markets are very cyclical in nature and my observations of the parallels between the NASDAQ and OTCBB can create opportunities for “timing” investments in bulletin board equity securities. For example, from November 2005 to mid-April 2006, the NASDAQ enjoyed very substantial appreciation in value. In December of 2005, I noted that the NASDAQ was in the second month of a positive run and I expected the OTCBB to soon follow suit. The OTCBB hit a low point in dollar trading volume in December 2005 and then recovered explosively. From its December 2005 low to early April of 2006, dollar trading activity for the OTCBB improved by nearly 150%! When this occurred, a number of bulletin board stocks experienced amazing gains. As a matter of fact, a number of OTCBB stocks achieved quadruple digit percentage gains!

Look at the recent activity of the NASDAQ. From May to mid-July of 2006, the NASDAQ was in a steady decline. During this time, as I have clearly shown, dollar volume for the OTCBB quickly followed suit. From May 2006 to July 2006, dollar volume for the OTCBB dropped by nearly 50%! Now for the good news. Since mid-July, the NASDAQ has enjoyed appreciable gains of nearly 10%. Likewise, beginning in August 2006, the OTCBB began to follow suit and dollar trading volume improved by about 15%. As gains for the NASDAQ have been extremely sharp from mid-August until now, I expect that dollar volume for the OTCBB will increase dramatically, possibly to levels similar to March-April 2006. More money coming into the OTCBB means more trading activity and more opportunity for big gains!

The point I am trying to stress is that the OTCBB activity tends to parallel that of the NASDAQ. Use this information to your advantage! People always ask, “How do you determine when to buy and sell a penny stock?” Well, this is one way to do it, especially if you are swing trading.

If you liked this article, you will love The Little Black Book of Microcap Investing written by Dan Holtzclaw, author of the best selling book Penny Stocks: The Next American Gold Rush. This book is packed with 208 pages of great NASDAQ/AMEX microcap stock, OTCBB penny stock, and Pink Sheet stock information.

Click here for more information on The Little Black Book of Microcap Investing. Use the coupon code "book" to save $3 should you choose to purchase this book.

Sunday, September 10, 2006

Blood in the Streets Investing

Hey guys, Dan Holtzclaw here, aka the "Stock Doc". Just in case you don't know me, I am the author of the Best Selling Book "Penny Stocks: The Next American Gold Rush" and the newly released book titled "The Little Black Book of Microcap Investing" available at www.microcapbook.com I am new to the PennyMarkets Blog. My goal is to give you folks a different spin on microcap stocks. For my first blog, I want to talk about one of my favorite investing strategies...Blood in the Streets Investing.

For starters, what exactly is blood in the street investing? This investment strategy attempts to identify good stocks that, for one reason or another, have fallen out of favor with Wall Street. These stocks are typically in the doldrums and are usually approaching or setting 52 week lows. For investors with a little intestinal fortitude, these stocks offer opportunities for appreciable long term gains. These gains may not come overnight, but with time, a solid blood in the street stock can add a substantial boost to your portfolio.

As Warren Buffet once said, “…be greedy when others are fearful!” Well, nothing tends to strike fear in the heart of an investor more than a tanking stock. Blood in the street investing is not for everyone as it can be a very gut wrenching process. To buy a stock when everyone else is selling is difficult. You must also be willing to sacrifice some time. Unless you have a magic crystal ball, there is no telling when the stock in question is going to right its course. As it is impossible to predict the bottom for these stocks, I usually purchase them on a downtrend and they often continue south after I get in. That is okay because I am prepared for this. In fact, I expect it. Many times, if a stock continues to fall, I will do something else that many experts advise against...I will average down. (I will tell you more about averaging down in a future article). Now you must realize that I don’t do these things by the seat of my pants. I do this because I am confident in the stocks that I have invested in. I gain this confidence by setting my stock screener to find stocks that meet certain criteria. (I give these criteria in my book...if want to see exactly how I set up my Blood in the Streets Stock Screener, buy a copy!) After setting the parameters for my stock screener I then examine each stock individually. (If you want to know exactly what I look at when examining these stocks, buy the book!)

With blood in the streets investing, you cannot simply pick up a stock just because it is near its low. There must be other reasons for buying the stock. That is where my stock screener and other identifying factors come in. Sometimes good stocks fall in spite of strong fundamentals. If you can identify such stocks, you can acquire them at a significant discount.

Last month, I gave 5 blood in the street stock picks on my website www.stockdoconline.com
These stocks all met the specific blood in the streets criteria that I discuss in my book. Since putting out my picks last month, these 5 stocks have risen an average of 26.58%! One of the stocks rose an amazing 55%! You must remember that all of these stocks were AMEX and NASDAQ stocks. Gains such as these on the big boards are quite impressive. Let's see your mutual fund top that in one month!

Can you perform blood in the street investing with penny stocks? I would say "yes", but only under certain circumstances. Remember, you can't just rush out and buy any old stock just because it is near its 52 week low. The stock must satisfy other criteria. Right now, I have 3 OTCBB and Pink Sheet stocks in mind that satisfy these criteria. One of these stocks is RHWC (yes, I own shares in this stock). If you want the other 2, buy a copy of my book at www.microcapbook.com Type in the coupon code "Penny" when buying the book and I will give you a $3 discount plus the other 2 blood in the street picks.

Thanks and Good Luck with your trades!


Monday, September 04, 2006

NHCT: What’s In a Name

When Macy’s bought out Marshall Field’s (MF) I was concerned. I pictured my favorite department store being dozed to the ground, with all of the name brand labels being ground into the dirt. That isn’t what happened. Actually, not much happened. The company now has a Macy’s charge card but even the name on the front of the store stayed the same. A pretty good reason for this is that MF in our area had a pretty good sales record and client base. What good would it do to change the store? Suspicious people like me who had formerly shopped there might back off. Changing the name might actually lose customers. The other part of that is that Macy’s is a good name – but so is MF. There is not really a huge difference in what they do; they are both department stores (or were). If an auto parts store had bought MF, then it might make sense to change the name.

The above account is used to illustrate my confusion concerning a name change that caught my eye recently. On August 28th, National Healthcare Technology Inc. (OTCBB:NHCT) announced that they had chosen a new company name: Brighton Oil, Inc. Does that make sense? What in the world does healthcare have to do with oil? I am sure there are some connections, perhaps in manufacturing plastic items or something like that. Is the company functionally different? That is my question. Has there been such a dramatic shift that a new name is warranted? Or, is a name change the best way to cash in on some of the oil hype in the media? The brief press release issued by Brighton stated that this was the most appropriate name to reflect their growth into the oil and gas industry. I’m not convinced. A comprehensive explanation issues by Brighton might clarify things for me – and for its investors.

Monday, August 28, 2006

CHHH: Take Two and Call Me…

Herbals are becoming big business in America. Much of mainstream society is willing to take a synthetic drug to alter moods, feelings states, and pain control. There are still many Americans who seek out a safer, more natural way to deal with their various ills, at least for the first attempt at remediation. This is where herbal medicines come in.

China Health Holding, Inc. (OTCBB:CHHH) is one of those companies that has capitalized on the herbal market. CHHH is a developer, marketer, and manufacturer of herbal supplements based on all natural Chinese medicines. As this is an expanding market, CHHH recently announced that they had negotiated a deal with Henan Furen Huaiqingtang Pharmaceutical Co. Ltd. and Henan Furen Pharmaceuticals Group Co. Ltd. and the shareholders of Henan Furen Huaiqingtang Pharmaceutical Co. Ltd. CHHH will acquire 60% of the outstanding stock of Henan Furen Huaiqingtang Pharmaceuticals Co. Ltd. (HFHP). This deal is a boon to CHHH shareholders, as it will open up new markets and manufacturing sites in China as well as giving CHHH the rights to 46 pharmaceutical drugs being used there.

This is good news for Americans, as well, who are sick of dealing with the side-effects of synthetic drugs. The question of whether or not herbals work is another matter entirely. I think it depends on whom you ask. Some people swear by their herbal medicines and others say they found no benefit from them. I believe the same can be said of many synthetic drugs. The important thing is that the alternative drugs remain available to consumers in America and abroad.

Thursday, August 24, 2006

VTSS: No Gray Area

Just about everybody enters into a binding financial contract at some time in their life. We sign financial contracts all of the time without realizing that is what we are doing. If you have ever signed a mortgage, taken out a car loan, or signed a lease you have signed a binding financial contract. You have agreed to adhere to certain requirements in order to receive a loan, or goods or services. Even a credit card application is a financial contract. You are agreeing to use credit, while staying within certain parameters of use, i.e. paying the minimum amount due. It is a fairly easy concept to grasp as long as there is a clear expectation as to what is expected from both parties.

It is very confusing, then, that Vitesse Semiconductor Corporation (Pink Sheets:VTSS) has announced that they received an acceleration notice from the trustee for Vitesse's $96.7 million aggregate principal amount of 1.5% Convertible Subordinated Debentures due 2024. The trustee is claiming that Vitesse failed to make its SEC filings on time, violating the terms of the Debentures. Vitesse is claiming that the company has not violated the terms of the Debentures, and that there in fact was no requirement for SEC filings in a timely fashion.

There are always two sides to every story or there would be no argument. There is a due date on a credit card bill, and if the payment is late, a fee is added. Listen here, people, this is no late fee on a credit card. We are talking millions of dollars here. Either SEC filings were a requirement of the Debentures, or they were not. How could two business-savvy, intelligent entities have such strikingly different claims? It is a good question. I am sure VTSS investors will be awaiting its answer.

Thursday, August 17, 2006

CFPC: Statistics Don’t Lie…

I have heard it said before that statistics don’t lie, but liars use statistics. An example of this is that one half of all marriages end in divorce. That is true; however, the population used to reach that figure includes individuals who have had three, four, or more divorces. So, one person may contribute five divorces to the overall ratio. This is an unfairly grim forecast to those who are only on a first marriage, especially since every divorce a person has makes them more likely to have another. Therefore, if you are on your first marriage your odds of staying together are much better than fifty percent.

Another example of how statistics can stick you is correlations. A correlation is simply two factors that tend to occur together, or in tandem. Number crunchers can look at these factors together in a population and can find the probability that these factors would co-vary. Correlations can then be used to make predictions…. Or can they? Correlation does NOT equal causation! An example of this is exercise and income. The more exercise you get, the higher your income is. Does being fit CAUSE a higher income? Of course not! The third factor that influences BOTH is higher education. The more you know, the more likely you are to stay fit, and to get a better paying job. Recently a study based on correlations made headline news and it really hit close to home. After looking into it a bit further, I thought the evidence needed some more scrutiny.

Harvard recently conducted a quasi-experimental study (i.e. looked at self-selected groups) in which they found that there was a correlation between heart attack and light to moderate coffee consumption, about two to three cups per day. This flew in the face of other research that has suggested that coffee has some health benefits. In addition, the study indicated that if you were a heavy coffee drinker you were less likely to have a heart attack. That sounds counterintuitive. So coffee is bad for me, but the more I drink the better off I’ll be? Does that make sense? Is the same true for French fries? Let’s add some logic to the equation.

Apparently the individuals who drank coffee moderately also had at least three other factors that put them at high risk for a heart attack. Smoking, French fries, and a sedentary lifestyle are all examples of such factors proven to increase risk of heart attack. So the more of those three factors I indulge in, the higher my chances are of having a heart attack. Aha! That makes more sense. Since the study was done in Costa Rica, it is not surprising that most of the individuals drank some amount of coffee. So what about the heavy coffee drinkers? Shouldn’t they have a higher risk of heart attack if coffee is truly bad for the heart? Good question.

Shortly before this study was released Coffee Pacifica, Inc. (OTCBB:CFPC) announced that they were expanding their wholesale roasted coffee business. They also executed a letter of intent to acquire a coffee roasting company in Denver, Colorado, pending certain requirements are met. It may seem to some that Harvard’s study, which made national news, could halt any expansion for CFPC. The study could be a roadblock; I would say it is more of a bump in the road. In a study based on correlations, your opinion is as good as mine. I’ll drink to that.

Wednesday, August 16, 2006

SDGL: Why The Dirty Mind?

Has anybody been troubled lately by an advertisement, commercial, or show they saw on TV, radio, or news? You know the kind I am talking about. The half-naked woman is slithering around seductively with her hair blowing in the wind – to sell a phone book; or the half naked woman is stretching on the floor in a provocative pose – to sell cat food. Have you seen the Sunday night primetime line-up lately? It’s filthy! It doesn’t really matter what channel you are watching. One channel is broadcasting a murder mystery show, complete with graphic images of dead bodies. Another channel is broadcasting smutty cartoons that I wouldn’t want my parents to see – let alone my children. Another is showing some evening soap opera, revolving around misdirected lust and illicit affairs. And other channels are broadcasting some hodgepodge mix of the first three. The Internet is full of the same. Is there any rhyme or reason to this?

Secured Digital Applications, Inc. (OTCBB:SDGL) today announced a 30 percent increase in revenue for the first six months of 2006. The company produces “media content” for the Internet, television, and other displays. A company like this cannot help but expand. In our society staying connected means a lot. I have only one comment for companies like SDGL and others. Our minds are only as clean as what we fill them with. Please remember that when you are filling our airwaves.