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We won’t attempt to define the parameters of what a Penny
Stock is, but rather, try and dispel some of the myths
surrounding them and focus on what our parameters are.
           The Securities and Exchange Commission requires all
    broker/dealers to obtain written acknowledgment from potential penny
    stock traders that they understand the risks associated with buying and
    selling low priced shares.  Most Brokers go ahead and obtain this
    signature when any customer opens an account whether or not they plan
    on trading low priced shares; therefore they do not have to keep a
    running list of Penny Stocks as defined by the SEC which would change
    on a second to second basis.  This definition, although somewhat
    complex, essential states that any stock not on a Major Stock Exchange
    or any stock that is under five dollars per share is considered a Penny
    Stock.  Although we are not registered Broker/Dealers, we do
    recommend that anyone interested in Micro Cap Stocks should read this
    disclosure from the SEC known as Schedule 15G.  Much of the
    information and advice in this document is grossly outdated, but just as
    much of it will always be epic and very useful.

            If we simply went by the SEC’s definition of a penny stock for our
    purposes, we would have a watch list of approximately 5-6000 stocks in
    the United States alone, which is close to half of all tradable securities of
    any size and price.  By sticking to stocks under one dollar, not only do we
    narrow this list a little bit, but we also increase the exponential
    possibilities for our trading style.  With increased possibilities comes
    increased risk, which is why we typically do not include stocks under a
    Penny.  Rules and regulations for Bulletin Board and Pink Sheet Stocks
    allow Market Makers to advertise prices in increments as low as 1/100th
    of a Penny, which also means that stocks can and do trade all the way
    down to as low as $.0001.  It may be hard to fathom how a stock could
    trade for a price that does not even exist in the real world, but when we
    think of buying a large amount of shares for a small amount of Dollars, it
    begins to make more sense.  The fact is, many of these sub-penny
    issues are dangerous and have millions and even billions of shares
    available for public consumption.  Administration of a reverse split, an act
    by which companies will give you fewer shares for the shares you own at
    a higher price, will eventual occur for 90% of all stocks currently trading
    below a penny.  We do experiment with the occasional sub penny issue
    with very short time frames and with a very small amount of capital, and
    ultimately, we never trade a stock below the price of $.001.

            Sticking to stocks below a buck and above $.001 narrows the
    playing field a bit, but we have several additional criteria for our general
    screening process.  First of all, stocks trading on a major Exchange such
    as the NASDAQ or NYSE that are priced under one dollar are typically
    out.  Our major reason for this is that these exchanges have a very
    simple rule that stocks cannot remain on their venue if they are in this
    price range, and a delisting and subsequent exodus by investors can
    and does happen.  The AMEX and NASDAQ Small Cap exchanges cater
    to smaller companies, and have slightly more lax rules, but there are
    definitely better places to look for tiny emerging growth companies.  If you
    are looking for the next Enron or WorldCom, stocks under a dollar on the
    NASDAQ and NYSE would be the best place to start your hunt as fallen
    Giants and companies on the verge of bankruptcy typical lie within this
    particular framework.  Unlisted stocks, or stocks quoted on the Over the
    Counter Bulletin Board (OTC BB) or the Pink Sheets tend to be more of
    the exponential growth stories or ground floor opportunities.  There are
    two clear differences between Bulletin Boards and Pinks, however, and
    both are very important aspects of liquidity and transparency.  Bulletin
    Board stocks are required to file all of the same financial reports to the
    SEC as listed stocks, but have no minimum price requirement.  In
    addition to not being required to file, it is often hard to obtain a Level II
    quote for Pink Sheet stocks.  Although there is a new breed of timely
    filling level two accessible Pink Sheet stocks emerging, of which we are
    paying very close attention to, at the present time we tend to stick with the
    OTC BB.  All of this coupled with our price requirements above narrows
    our parameters of what Penny Stocks are to a consistently smaller list of
    approximately 1000 stocks.  From this list, we can separate the
    companies interested in shareholder value from those just interested in
    selling shares to the public.  To further enhance our possibilities, we
    narrow this list once more in favor of the most highly liquid securities.
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