To OTC Journal Members:

The S&P 500 opened Friday morning within four points of the first trading day of 2004. The market has achieved a perfect standoff between the bulls and the bears this year. Perceived future interest rate hikes, combined with rising oil prices and Middle East/terrorism fears, versus outstanding corporate earnings and growth have balanced each other out. Put buying is at an all time high, volume is low, and stocks have stopped selling off. This indicates fund managers are not selling their positions. In fact, they are simply buying puts as an insurance policy against some unforeseen terrorism event, and hanging on to their stocks. They are willing to give up some of their upside in return for downside protection.

This was an interesting week. When we look back, this week could be the "tipping point" which set up a summer rally. In April and May, good news was bad news and bad news was bad news as I chronicled in the April 24th edition. On Friday, for the first time in two months, good news became good news again as the Intel mid quarter update sent the semi conductor index back up the charts, and payroll numbers showed 250,000 new jobs were created in May. This economy has now created nearly 1 million new jobs in the past three months. The NASDAQ charged up 18 points and attempted to regain the 2000 level. The DOW added 47 and remained solidly above its 200 day moving average. Back in April and May the market would have sold off on this good news on fears of higher interest rates.

In today's edition I am introducing a new company. The timing could be perfect out in front of a potential summer rally. The upside potential is too compelling to pass up. I first met them back in September, and felt they needed to achieve a commercial breakthrough before they were ready for coverage. They delivered.

Here's some background:
 

The Taser (NASDAQ: TASR) Phenomenon

You are looking at a chart of Taser, the company that manufacturers and markets non lethal weapons designed for police and self defense. The Taser shoots 50,000 volts through a suspect, temporarily paralyzing the target without any permanent damage.

Taser was probably the most talked about stock on the NASDAQ during the first quarter. Short sellers who bet against the company's fundamentals were met with nasty upside surprises for three consecutive quarters. This is the chart of a classic short squeeze. Taser achieved $13.1 million in sales in the March quarter, up from $3.4 million the previous year in the same quarter. You would think the company delivered $1 billion in revenues from looking at the chart.

Despite the major correction in the April/May sell off, the market is still placing a huge premium on the company's growth potential. They make a product which could end up in every police car in the US eventually, and the market is willing to pay up for this potential.

There are many similarities between today's new company and Taser, as follows:

• Both companies are located in Scottsdale, AZ within site of each other.
• Both companies use the same attorney for patent work and Intellectual Property Protection
• Both companies have unique products with no real competition which could end up in the hands of many law enforcement officers.
• In its first year of commercial introduction, Taser achieved $2.5 million in sales. Our new company's first commercial contract was announced last week: you guessed it- $2.4 million.

• Our new company has much larger market potential- it includes all emergency response agencies (i.e. Fire, Police, Paramedics, etc.). 
• This new company's business has much less potential liability as they don't injure anyone.

Simply put, when the police, fire department, paramedics, and any other emergency responder shows up at a disaster site, they cannot talk to each other. The 911 commission and SAFECOM findings have put this issue in the forefront of emergency response problems.

Here is the solution, just on the heels of their first of what I believe will be many future contracts:
 

Aegis Assessments (OTC BB: AGSI): First Major Commercial Breakthrough

The primary arm of the US Department of Homeland Security's Science and Technology Division is known as "SAFECOM". On March 10, 2004, SAFECOM published a statement of requirements for Public Safety Wireless Communications and Interoperability. Click Here if you wish to read the report. Here is the opening statement:

    "Inadequate and unreliable wireless communications have been plaguing public safety organizations for decades"

In short, emergency response teams, whether they be fire, police, paramedics, or military cannot communicate. The problem is in the headlines nearly every day, and was brought out in detail during the recent 911 hearings.

Aegis Assessments has the most elegant, and cost effective solution to the problem on the market today. If anyone knows of anything better, please email me the information.

You are looking at a picture of the company's revolutionary new "Radio Bridge" product.  Local law enforcement, fire departments and emergency medical personnel often are in a situation where they are equipped with hand-held radios that cannot communicate with one another. When they show up at a major disaster, they cannot talk to each other. Currently, they are operating on different frequencies or use different modulation schemes. The SafetyNet™ Radio Bridge™ solves this problem inexpensively and with no pre configuration. The SafetyNet™ Radio Bridge™ interconnects these radios instantly and bridges these devices far beyond their normal capabilities.

I have seen a demonstration of the product in front of a committee from SAFECOM. It's about the size of a large brief case and battery operated. It's amazingly simple. Once a commander shows up at an emergency site, he opens the case, and plugs in a hand set from each of the emergency response units. They can then talk to each other over their own individual wireless devices with no modifications. The devices can separate them into groups, and allow them to talk with each other either in mass or selectively simply by adjusting the dials.

The product sells to the end user for $20,000 per unit, and the company booked its first $2.4 million order early last week. I believe this is the first of many orders the company will receive this year. Click Here to read the press release.

For competitive reasons, the company does not want me to disclose their profit margins. However, I can tell you they are outstanding.

There are two other products Aegis has developed, which are now being commercially introduced.
 

Mobile Command Center and Wireless Safety System

This is Aegis's mobile command center. This is a more advanced version of the Radio Bridge product, and acts as a complete mobile command post for directing relief efforts in a emergency situation.

There are a couple different versions. Another has multiple video screens for monitoring remote video camera deployments. Voice, data, and video are all combined with this unit, and they communicate through a self created WAN (wide area network). Visit the Aegis's web site at www.aegiscorporate.com for more pictures and descriptions.

The wireless communications have a range of about 5 miles, and work on the new 802.11G wireless IP protocol. In essence, the unit sets up its own local wireless internet to facilitate communications.

The mobile video camera you see here can be deployed throughout any kind of disaster site. The commander can then monitor activity throughout the emergency site through both voice and video, and deploy teams as needed.

Aegis has also developed a Wireless Safety version of this product designed for installation in high rise buildings. It is being unveiled later this week at the Associated Builders and Owners of Greater New York Tradeshow beginning June 8, 2004 at the Jacob Javits Convention Center in New York City.

The battery powered mobile video cameras can be easily installed at strategic points. They don't require and external power source, are very inexpensive, and will broadcast an encrypted signal over 802.11G.

In the event of a fire, a commander could then pull up in front of the building with the Wireless Safety System Command Center. He can simply open the case, activate the internal cameras, and see where the danger spots are. Firefighters are put at risk most in situations where they don't know what they will be encountering. This is an inexpensive and universal solution to the problem.

Internal video monitoring systems can be useful in these situations, but don't work on a universal platform. Responders need to locate the control room and get access. This can cost precious seconds in an emergency situation when lives and property are at stake.
 

Conclusion

The market for the Radio Bridge product is mind boggling. It is estimated there are 2.5 million public safety first responders in the US alone, represented by 44,000 different agencies. None of them can talk to each other at an emergency site. As Congresswoman Harman points out, they'd be better off rolling down their windows and yelling at each other.

In FY 2003, Congress appropriated $154 million, earmarked exclusively for Communications Inter Operability. That money is just beginning to find its way towards investment in solutions now.

Working in Aegis's favor is the unfortunate reality that emergency response agencies are highly competitive. Each wants to take command at a site, and there are no clearly defined hierarchy boundaries. Therefore, once one agency has the Radio Bridge Product, they will all have to have it in order to compete for control.

You are getting an exclusive first look at a company few people know about. They just received the first order for 200 units, and these are earmarked by the distributor for NY City alone. The rest of the country should follow suit shortly.

I expect the company to start delivering sales on the Mobile Command Center and Wireless Safety Systems later this year.

On the slightly negative side there are two issues. First, with 12.7 million shares issued and outstanding the market is valuing the company at just under $50 million. The company must deliver more sales to justify this valuation. If they achieve even a small market penetration, this obstacle should be easily overcome.

Second, the balance sheet is weak and will need to be improvement. Management has self financed to this point, but I expect an outside funding source will get involved soon to help them ramp up for major production.

As stated above, very few people know about this company. The stock is thinly traded, and there are no registration statements pending which could create an excess supply. The stock could be volatile on light volume. The company estimates there are only about 1.2 million shares in the public float.

The best strategy in a situation like this is to use a limit order and have some patience in accumulating. The stock closed at $3.80 on Friday. My suggestion is to use a limit order of $4, and keep it out there even if it takes a few days to fill. I strongly recommend everyone have at least some of this stock in their microcap portfolio. The upside is extremely compelling.

The unfortunate reality of today's world suggests there are likely to be more terrorism events on US soil. If so, this stock could trade well as the rest of the market tanks, thereby acting as an insurance policy for your microcap portfolio against an event related sell off.

FY 2006 will bring a Homeland Security budget of $170 billion. A very small piece of that pie should equate to a big return in AGSI.

Click Here to view our compensation on every company we have ever covered, or visit the following web address:  http://www.otcjournal.com/disclaimer.html for our full profiles and http://www.otcjournal.com/trading-alerts/disclaimer.html for Trading Alerts. MarketByte LLC has been paid a fee of $25,000 and 100,000 newly issued, restricted shares by Aegis Assessments for coverage of the company.

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