To OTC Journal Members:
 

Market Comment

Wow!!! What a great day yesterday. The quicker this sells off the better. Friday's action was very constructive for achieving the long term bottom and setting the market up to rebound. It's a painful process and may wipe out an entire generation of equity investors. It makes no sense, just as many stocks made no sense at the top. Stay out of the large cap arena for now, and wait for a trend reversal.

For those who are interested- Our editor made an initial repurchase of Cross Media Marketing (AMEX: XMM) in his own portfolio on Friday. We believe a dead cat bounce is likely, but we view this stock as highly speculative. Shares were purchased for a trade, not a long term investment.
 

Favorite Penny Stocks Ideas

In last weekend's edition we observed a pattern was emerging suggesting Penny Stocks were one arena where individual investors could still make money in the midst of the worst Bear Market of modern times. To read the edition simply click here.

This past week we have canvassed a few of our many contacts in the investment world seeking ideas in stocks which trade under $1. We got a few intriguing ideas in the $2 to $5 price range, and we may share them in the future. Today's edition is devoted to ideas in stocks under $1. None of these stocks has far to fall, and none have substantial institutional participation. Therefore, they may drift down when volume falls off, but it is unlikely you will see the kinds of severe down drafts hitting their larger cap brethren. Although risky, each of these stocks could yield a high percentage return in a very short period of time.

Each of these stocks is also characterized by strong upside based on unique technology, products, and growth. Here are some ideas in the penny stocks arena for your review, presented in the order of our favorites.
 

Cosine Communications (NASDAQ: COSN)

Cosine Communications develops and markets a communications platform designed to enable network service providers to rapidly deliver computer applications and communications services from within their networks

This company came public on September 26, 2000. It was a Goldman Sachs underwriting and was priced at $23. The stock's all time high was $71. Friday it closed at $.39.

Last November 2nd we featured this same stock at this same price in an edition we called our Riskless Rebound portfolio. The stock rebounded along with the NASDAQ to the $2 level in January for a 400% gain. Since then, the stock has plummeted along with the rest of the technology sector.

There are several reasons we have chosen this stock as our #1 pick as follows based on the March financial report:

• Cosine has no long term debt.
• Cosine has $1.48 in cash per share (three times the current price). At the end of March the company had $150 million in cash and cash equivalents.
• Cosine has a Book Value of $1.65 per share
• March quarter revenues were up about 15% over the same quarter the previous year ($6 million to $7)
• March quarter losses dropped considerably from the from the same quarter the year before.

Calypte Biomed (OTC BB: CALY)

We first featured this company on May 31st at $.138. In just seven weeks the stock has seen an intraday high of $.43, up 320% at the high.

As depicted in the chart, this stock pulled back dramatically in the last few days. However, as demonstrated by the uptrend line shown in blue, this stock has pulled back to a critical level for traders. It has retrenched exactly to its support line. If it stabilizes at these levels, the uptrend will remain in place, and now is the time to buy for those looking to establish a position or add to an existing position. If this stock continues lower from here technicians will view this as negative.

This is a dream situation for penny stock investors. This company has the only FDA Approved urine based test for the AIDS Virus. There has been $90 million invested in the technology. The company achieved $6 million in sales in 2001. 

This stock is highly liquid. It generally trades over 1 million shares every day.

Recently, Calypte Biomed announced it had added Dr. Luc Montagnier, the original discoverer of the HIV Virus, to its advisory board. Calypte also recently announced it had developed a rapid portable version of its urine based HIV test which works like a home pregnancy test.

Previous management was slow to market with this revolutionary product, and actually announced plans to wind down operations. New management is now in place, and the company is moving forward rapidly. There has been a consistent stream of good news coming for the past two months.

At its current level the company's market value is only $14.4 million. A rapid urine based AIDS test kit could be easily valued at $100 to $200 million, leaving substantial upside. Their current FDA approved test requires a laboratory, but is still considerably less expensive than blood tests, and now widely used by many major insurance companies. Calypte is focused on international distribution of its test kits, where the problem is more widespread.

Watch for many exciting developments out of this one in the near future. This could be a superstar in the near term regardless of market trends.
 

XML Global Technologies (OTC BB: XMLG)

This company is one of the lead developers of the next generation of software which will allow massive computer systems to communicate with each other. Currently, their main focus is on transformation products, which allows major customers to convert existing legacy systems without enormous expense.

The company made the biggest single sale in its history in June. The event caused the stock to reverse it downtrend, and allowed a new uptrend to take hold. As with CALY, XML Global is poised on its support line. The stock will either rebound from here, or reverse course.

Either way, risk was reduced considerably when the company announced the large contract and subsequently announced the signing of an LOI for a $2 million financing at terms favorable to shareholders, along with and an acquisition.

Sales are the best in the company's history, and ramping up. They have survived a nasty downturn in IT Spending, and their market is improving. The market cap is only $6.4 million, and they appear to have developed many of the premier tools for the coming XML revolution. If you like software companies with cutting edge technology, XMLG is a strong candidate for a penny stock portfolio. We feel the stock could find $.50 this year if the Bear Market continues, and $1 if the Bull returns.
 

Stock Group Holdings (OTC BB: SWEB)

Originally a pure dot com play, Stock Group Holdings has evolved into a totally different animal over the past 18 months. Three years ago this company was committed to having the best microcap web site on the internet.

This business model was flawed, as were so many others. They have evolved into the premier developer of due diligence web sites for public companies of all sizes. The SEC's new reporting and disclosure standards for all public companies created substantial demand for their suite of products.

They also provide outsourced servicing of many financial web sites world wide, as many companies are learning it is less expensive to outsource than absorb the costs associated with maintaining their own IT department.

Last month StockGroup acquired Stockhouse, one of the premier financial web sites. They purchased the assets of the company for next to nothing (three million shares of stock valued at $450,000). The Stockhouse site, found at www.stockhouse.com, is one of the top two sites in Canada, top five in the US, and top two in Australia based on traffic.

Management at Stockhouse never figured out how to leverage their enormous traffic levels into revenues. Management at StockGroup will figure it out, and get an outstanding return on investment.

The stock closed at $.16 yesterday, and trades with a mere $2.4 million market value, or about 1 times sales. They were cash flow positive for two quarters in 2001, and have just turned the corner in 2002. This stock is probably worth twice its current level. Watch for major improvements. The stock could easily be good for a double, and his little downside risk from these levels.
 

Radview Software Ltd (NASDAQ: RDVW)

This idea was contributed by a high profile hedge fund manager friend of the OTC Journal. The stock is very illiquid, averaging only about 10,000 shares per day in the $.25 range.

However, the company has no long term debt and $.70 per share in cash as of the March financials. This company has performance measuring software which allows client companies to accelerate the development of internet applications.

The stock is trading at less than one times sales, and one fund manager we spoke with felt the company was poised for growth.

If you choose to take a position, the illiquidity of the stock is a risk factor. You might not be able to sell it at a reasonable price if you decide to get out. However, the lack of volume suggests the stock is completely blown out, and could appreciate rapidly if buyers surface.
 

Urbani Holdings (OTC BB: UBNI)

This is a $.40 stock. The company purports to be one of the largest importers of specialty foods in the United States. On only $3.2 million in sales last quarter, this company did manage to make a profit.

Urbani Foods is expanding by acquisition. According to a recent press release, the company is on track to achieve $22 million in sales this fiscal year, which is approximately double the previous year.

Furthermore, the company always enjoys its best performance in the third and fourth calendar quarters.

While there is no exciting new technology associated with this idea, food stocks have been trading well in this environment. There are probably many small specialty food companies which could be absorbed.

We don't know a lot about the company, but a good friend of the OTC Journal who has given us some great ideas in the past suggested we include the stock. This stock is also trading at less than one times sales if there forecast for the current fiscal year is accurate. They were profitable last quarter and had positive cash flow. This tends to minimize the risk.

SwingWire.com also has a lucrative incentive model for experienced investors and traders who consistently outperform the market. Share market ideas with other like-minded investors, establish a proven track record, provide insightful commentary, attract followers and ultimately become one of the Internet's highest paid and most sought after CyberAnalysts! 

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MarketByte LLC has been pledged a fee of 250,000 free trading shares of Calypte common stock by First Stage Capital for coverage of Calpyte Biomed. MarketByte LLC has been paid the following fee by XML Global for a year of representation extending from February 2, 2001 to February 2, 2002: $100,000 cash, 60,000 shares of free trading stock, 60,000 shares of restricted stock which are now free trading, and 60,000 options exercisable at $2. The 60,000 shares of free trading stock have been contributed by a third party on behalf of the company. MarketByte's contract to represent the company expired February 2, 2002. The contract was renewed for another year, and XML Global has paid compensation of $20,000 in cash and one million shares of newly issued restricted common stock. Please review our policy on selling shares found in our Mission Statement on our home page.

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