Detailed Quote: http://www.otcpicks.com/quotes/MFLI.php

Company Profile: http://www.otcpicks.com/muscle-flex-inc.htm

Muscle Flex Inc. brings new products to market using direct response TV infomercials specializing in the health, fitness, wellness and hygiene sectors. As well, Muscle Flex Inc. develops and creates general television content for network and cable television distribution. Muscle Flex’s corporate strategy is to develop new and innovative products for sale and distribution via its proprietary direct response marketing system and the creation of television media and shows for general network and cable broadcast.

MFLI News:

January 27 - Muscle Flex to Make a Major Media Announcement on Tuesday, February 2, 2010 Regarding Its Defining Television Project

Muscle Flex Inc. (OTC: MFLI) (www.MuscleFlex.com) announced that it will make a major media announcement on Tuesday, February 2, 2010 with regards to its company defining television project. Muscle Flex Inc. has been developing this media project for several months and has worked with its marketing partner TLK Fusion (www.TLKFusion.com) to bring the project to an advanced stage of development with some of Hollywood’s most influential players.

In November 2009, Muscle Flex signed with Hollywood heavyweight public relations and marketing firm TLK Fusion. With TLK Fusion’s influential relationships within the entertainment industry, the Muscle Flex media project was introduced to some of Hollywood’s elite. During the past two months, both Muscle Flex and TLK Fusion have developed the project to an advanced stage in concert with a number of Hollywood’s most influential and powerful entities.

“I describe this Muscle Flex project as a ‘company defining media project’ given the size and scope of the project and the individuals involved,” commented Danny Alex, CEO of Muscle Flex Inc. “On February 2, we will be in a position to provide investors with details of the project as well as additional information with regards to our partners who are helping bring this project to reality. At this point, everyone who has been introduced to the project has been very eager to be involved which has validated all of the work that has been put into it thus far as well as its viability.”

The definition of penny stocks , also known as micro-cap stocks, varies. A stock is termed as a penny stock based upon its market capitalization and share price. According to the US Securities and Exchange Commission (SEC), a stock is termed as penny stock if its share price is below $5. However, many in the investor community believe that a penny stock is one with the share price of $1 or less. As junk bonds are compared to investment grade bonds in fixed income market, penny stocks are compared with blue chip stocks in stock markets. Trading in penny stocks are far more riskier and speculative than trading in blue-chip or other mid-cap or large-cap stocks. Several investors believe that investing in penny stocks is like gambling, that one has to be prepared for losing money. Moreover trading penny stocks can be more expensive. Penny stocks are usually traded in the Over-the-Counter exchange or on the pink sheets. 

If you intend to invest in penny stocks you should know the differences between penny stocks and other stocks, such as blue chips and mid-caps. While the performance of mid-cap and large-cap stocks is driven primarily by fundamentals, several analysts believe that the performance of penny stocks is driven primarily by investor speculations. If you analyze the fundamentals of 100 penny stocks, perhaps only two or three would be generating superior returns.

Despite the issues associated with penny stocks, several investors intend to invest in penny stocks, since they believe many of today’s blue-chip stocks, such as, Microsoft (Nasdaq: MSFT) and Wal Mart (NYSE: WMT) were once penny stocks. However, the share prices of these companies were almost never trading for pennies, however it appears that way when one looks at the price adjusted for stock splits. Many investors ignore this fact.

Since many penny stocks are traded on the pink sheets and are not scrutinized by the SEC, you will find it more difficult to find credible information about them.

Penny stocks often lack liquidity, which means investors would find it difficult to buy or sell. A lack of liquidity often helps fraudulent investors to manipulate the share prices. The SEC itself in Schedule 15G states “Investors in penny stock should be prepared for the possibility that they may lose their whole investment”.

A penny stock traded on the over-the-counter exchange has a higher chance of being delisted for lack of compliance. If the particular company is unable to list its stock on another exchange or become re-instated, you may lose 100% of your investment. You should consider this seriously, if you intend to take long positions in a penny stock.

Several new investors are attracted to penny stocks, given their low price and potential for substantial gains. There have been instances where penny stocks rose more than 1000% in a few days in the past, but this is extremely rare and often the price is not sustained. There are historical evidences that most penny stocks lose their entire value. If you are a new investor, you need to be aware of the risks involved.

If you still want to invest in penny stocks, do the relevant research into the company’s fundamentals and ignore the pre-conceived theories about the successes of the penny stocks in the past.

Detailed Quote: http://www.otcpicks.com/quotes/IVIT.php

Invicta Group, Inc. is a full service multimedia management and marketing company. Invicta utilizes a number of websites, a large database, event productions and promotions, and its experienced team to help clients manage, maintain and improve their overall businesses. Current projects include: Water Tower Surgical Center, TravelHotLink.com and TicketHotlink.com.

IVIT News:

October 15 - The Invicta Group Acquires IMAGE Chicago Magazine and the IMAGE Brands From STL Marketing Group

The Deal Allows Invicta to Add an Established Media Brand While STL Can Focus More on Their Core Business and Reduce Some Liabilities

Invicta Group Inc. (OTC: IVIT) announced that the company has acquired specific assets related to IMAGE Chicago Magazine and the IMAGE Worldwide brands. The main purpose of this new acquisition is to help the Invicta Group expand their media, marketing, event production, and event promotion services.

IMAGE Chicago Magazine and IMAGE Worldwide have been involved with 100s of special events ranging from celebrity appearances, fashion shows, product launch events, and other types of events during the past 5 years. IMAGE has also been printing the magazine IMAGE Chicago for the past 4 years. IMAGE has built a solid brand in the entertainment, fashion, and health and beauty industry. The current staff will stay on board and work with the Invicta Group.

Invicta is going to revamp the magazine to focus a larger portion on health and beauty and tie in the medical community, especially those involved with the Water Tower Surgery Center. The magazine will still cover celebrities and fashion but will expand its coverage and distribution to include more of the health and beauty industries.

STL Marketing Group CEO Steven St. Louis said, “Our core businesses include printing, packaging, and design solutions and this sale helps us improve our balance sheet and focus more on our core businesses.”

Invicta Group’s CEO Paul Sorkin said, “This is another great acquisition for the Invicta Group. IMAGE is a perfect fit for the Water Tower Surgery Center. A person’s health and beauty help define their IMAGE and we couldn’t think of a better way to help doctors showcase and market their IMAGE in print, online, and at events. The new magazine will be released in early December and will include some expanded editorial along with some additional relevant strategic distribution.”

ABOUT IMAGE CHICAGO MAGAZINE

IMAGE Chicago Magazine is an entertainment and lifestyle magazine that focuses on everything in fashion, health, beauty, and entertainment for the Windy City. IMAGE provides its readers with the latest on what’s hot today and what will be tomorrow. IMAGE features the best in celebrity interviews, editorial content on fitness, fashion, beauty, music, relationships and more, along with some incredible fashion spreads and photo galleries. By using both print and online media IMAGE has created an interactive relationship with its readers and continues to inform and entertain.

ABOUT STL MARKETING GROUP

STL Marketing Group is committed to brand movement through Three distinct vehicles: creative and design services, packaging and supply solutions, printing and mailing. These core business units allow for supply chain synergy and a one-stop shop approach for clients to achieve their strategic communications objectives. Vertical integration and cross promotion between company sectors allows STL Marketing Group the ability to share key resources, maximize efficiencies, and utilize economies of scale. These components improve buying power for the corporation and increase value for clients and shareholders. STL Marketing Group will utilize a blend of products, services, and relationships to create an extraordinary customer experience and foster unbounded company growth.

In most years most stocks go up…the stock market is up.  Much of the time the stock market is not real interesting, with stock prices fluctuating moderately.  Most of the time we are in a bull market, where stocks go higher.  In a bear market prices fall.  When stock prices are crashing this is an exception that definitely gets the public’s attention.

This is especially true today, because millions of clueless investors have their financial futures riding on stocks (stock funds) in 401(k) and IRA plans.  Here’s your basic investor guide to bear markets of the recent past.  How bad have stock prices fallen before, and how does this compare to 2007-2009?

In measuring stock market or average stock performance, we will focus on the DOW JONES INDUSTRIAL AVERAGE (DJIA).  This stock indicator is the oldest and still the most popular with investors, often referred to as simply the DOW.  It tells you how the big blue-chip stocks are doing, and basically indicates how stocks in general are performing.

Historically, stocks have returned about 10% a year over the long term.  If the Dow drops 5% in a week, the vast majority of investors lose money.  When it drops by 20% or more over a period of time we are in a bear market, and virtually all stock investors (except the rare speculator) lose money.

History can give us a sense of perspective, and serve as a basic investor guide.  Now let’s look at some truly ugly stock markets.

The bear market that started in 1929 was the worst in American history, with the Dow falling 89% at its low in 1932.  It took about two decades for stock prices to then return to their previous highs of 1929.  A major reason for the market crash: excessive financial leverage.  Investors had bid up stock prices with borrowed money.

1973-1974:  In less than two years the stock market fell 45%.  This bear market was accompanied by rising interest rates and higher inflation.

2000-2002:  The Dow fell 38%, but growth stocks got hammered (especially hi-tech stocks).  The NASDAQ Composite Index fell 78% in less than three years.  Stocks that had gone up like a rocket fell to earth like a rock.  Investor speculation created excessive stock prices especially in areas related to personal computers, the internet and cell phones.

2007-2009:  After rising for about five years, stock prices started falling in the autumn of 2007.  A year later financial crisis acted as a catalyst and the market took a nose dive.  In early 2009 stock prices were down over 50%.  The world’s financial system, and economies across the globe, were in serious trouble.

Once again excessive financial leverage and speculation played a major role.  Major financial institutions,other corporations, investors and homeowners all participated in this game.  Financial leverage is simply investing with borrowed money.  Some major Wall Street firms went to incredulous extremes.  Some folks on Main Street did as well, speculating on real estate properties with little or no money down.

To sum it up, the bear market that started in late 2007 is the worst since the Great Depression.  The end can not be accurately predicted.  Investors generally focus about six months into the future.  When, and only when, they  see a brighter future they will start buying and send stock prices higher.  If the trend continues, a new bull market is born.

I heard a great story about Warren Buffett recently.  One day Warren was riding in the elevator at his office in Omaha.  A few other people got on the elevator as well.  In the middle of the floor was a shinny penny. Everyone had a chance to pick it up, but nobody did.  Finally after a few seconds Warren reaches down and picks it up.  He looked at it for a moment then slipped the penny into his pocket.

Rumor has it, he said “the start of my next billion” as he put the penny in his pocket.

I don’t know if the story’s true or not, but it sounds like something he would do.  We all have dreams of turning pennies into millions (or billions in Warren’s case).  Some people have a knack for making money out of almost anything.

In the stock market, there’s a high risk, high reward way to make lots of money.

 Investing in Penny Stocks.

Now before you question my sanity let me ask you a question?  Have you ever traded penny stocks?  Do you even know what a penny stock is?

There are hundreds of definitions for a penny stock.  Some investors think very literally.  Only stocks that trade for pennies a share are penny stocks.  The US Government defines penny stocks a little more liberally. Here’s the quote right from the SEC website:

The term “penny stock” generally refers to low-priced (below $5), speculative securities of very small companies.  While penny stocks generally are quoted over-the-counter, such as on the OTC Bulletin Board or in the Pink-Sheets, they may also trade on securities exchanges, including foreign securities exchanges.  In addition, penny stocks include the securities of certain private companies with no active trading market.

Look, forget all that legalese and government mumbo jumbo.

For me a penny stock is a publicly traded company whose entire market value (their market cap) is very small.  See, stocks are classified according to their size.  Large cap stocks are worth more than $50 billion.  Mid cap stocks are worth $10 to $50 billion.  Small cap stocks are worth $1 to $10 billion.  And micro-cap stocks or penny stocks are worth from $50 million to $1 billion.

How do you classify companies worth less than $50 million . . . I call them hobbies!

Seriously, if you’re able to invest heavily in one of these micro-cap penny stocks just as it starts to grow, you can make some serious money.

Do you want an example?

About a year ago I was doing some research on the coal industry.  If you don’t know, coal’s one of the biggest sources of energy for the United States.  Some people have even crowned it “King Coal” and called the US the Saudi Arabia of coal.

To say we have lots of the stuff is an understatement.

While I was doing some research I came across a very interesting company, James River Coal (JRCC).  The company was founded in 1988 and produces coal for sale to electric utilities and industrial consumers. They have 6 mining complexes, 26 underground and surface mines, and 10 preparation plants.  All told the company has more than 265 million tons of proven and probable coal reserves.

Not bad for a little company that in August of 2007 was selling for less than $5 a share.

James River Coal was a penny stock.  The entire company was worth less that $125 million dollars.

Coal prices however were starting to go up and up and up.  And do you know what went up and up and up along with prices?  That’s right, the stock prices of all the coal companies.  Not just James River Coal but some of the big players too.  Companies like Arch Coal (ACI) and Massey Energy (MEE) watched as their stock climbed.

So how can you make money trading these penny stocks?

The stock for JRCC was stuck below $5 for months and traded below $10 for almost half a year.  You could have bought all you wanted.

Then as oil prices and coal prices started to climb the stock just took off.  In less than a year the stock skyrocketed from penny stock status to more than $60 a share.  You read that right . . . more than $60 a share.

JRCC returned more than 1,100% in less than a year!

Now you’ll notice the stock’s recently fallen in price.  That’s no doubt due to many investors taking their huge profits off the table.  Despite this recent correction, the stock’s still up more than 500%.

Now you see how investing in penny stocks can be so valuable?

Don’t forget, like anything, investing in a penny stock does have some risk.  Make sure to do your due diligence and discuss with your broker all the risks and potential rewards of penny stock investing.

Many are agree that this is good news but even more are skeptical as job numbers are still indicating a slow down rather an upward trend.  News of this latest survey is sure to have an interesting effect on the market as the Dow steadily creeps towards 10K. 

You can read more about this story in the business journal 

If you bought early and closed your position miday than you too should have captured a 10-15% Profit, keeping with our methodology.

Remeber Moderate Profits Day After Day!

Connectyx Technologies
Symbol: CTYX.PK
Current Price: .10

This stock is currently receiving promotion from a small number of the Internet Stock Promoters.  Promotion is light but the chart for this stock indicates that it may lend additional help in pushing this stock upward.  Add this stock to your watch list for the tomorrows trading day. 

A Guide for Investors

Introduction

Information is the investor’s best tool when it comes to investing wisely. But accurate information about “microcap stocks” — low-priced stocks issued by the smallest of companies — may be difficult to find. Many microcap companies do not file financial reports with the SEC, so it’s hard for investors to get the facts about the company’s management, products, services, and finances. When reliable information is scarce, fraudsters can easily spread false information about microcap companies, making profits while creating losses for unsuspecting investors.

In the battle against microcap fraud, the SEC has toughened its rules and taken actions against wrongdoers, but we can’t stop every microcap fraud. We need your help in winning the battle. Before you consider investing in a microcap company, arm yourself first with information. This alert tells you about microcap stocks, how to find information, what “red flags” to consider, and where to turn if you run into trouble.

What Is a Microcap Stock?

The term “microcap stock” applies to companies with low or “micro” capitalizations, meaning the total value of the company’s stock. Microcap companies typically have limited assets. For example, in cases where the SEC suspended trading in microcap stocks, the average company had only $6 million in net tangible assets — and nearly half had less than $1.25 million. Microcap stocks tend to be low priced and trade in low volumes.

Where Do Microcap Stocks Trade?

Many microcap stocks trade in the “over-the-counter” (OTC) market and are quoted on OTC systems, such as the OTC Bulletin Board (OTCBB) or the “Pink Sheets.”

• OTC Bulletin Board   The OTCBB is an electronic quotation system that displays real-time quotes, last-sale prices, and volume information for many OTC securities that are not listed on the Nasdaq Stock Market or a national securities exchange. Brokers who subscribe to the system can use the OTCBB to look up prices or enter quotes for OTC securities. Although the NASD oversees the OTCBB, the OTCBB is not part of the Nasdaq Stock Market. Fraudsters often claim that an OTCBB company is a Nasdaq company to mislead investors into thinking that the company is bigger than it is.
   
• The “Pink Sheets”  The Pink Sheets — named for the color of paper on which they’ve historically been printed — are listings of price quotes for companies that trade in the over-the-counter market (OTC market). “Market makers” — the brokers who commit to buying and selling the securities of OTC issuers-can use the pink sheets to publish bid and ask prices. A company named Pink Sheets LLC, formerly known as the National Quotation Bureau, publishes the pink sheets in both hard copy and electronic format. Pink Sheets LLC is not registered with the SEC as a stock exchange, nor does the SEC regulate its activities.

How Are Microcap Stocks Different From Other Stocks?

Lack of Public Information   The biggest difference between a microcap stock and other stocks is the amount of reliable, publicly available information about the company. Larger public companies file reports with the SEC that any investor can get for free from the SEC’s website. Professional stock analysts regularly research and write about larger public companies, and it’s easy to find their stock prices in the newspaper. In contrast, information about microcap companies can be extremely difficult to find, making them more vulnerable to investment fraud schemes.

No Minimum Listing Standards   Companies that trade their stocks on major exchanges and in the Nasdaq Stock Market must meet minimum listing standards. For example, they must have minimum amounts of net assets and minimum numbers of shareholders. In contrast, companies on the OTCBB or the Pink Sheets do not have to meet any minimum standards.

Risk   While all investments involve risk, microcap stocks are among the most risky. Many microcap companies tend to be new and have no proven track record. Some of these companies have no assets or operations. Others have products and services that are still in development or have yet to be tested in the market. Another risk that pertains to microcap stocks involves the low volumes of trades. Because microcap stocks trade in low volumes, any size of trade can have a large percentage impact on the price of the stock.

Which Companies File Reports With the SEC?

In general, the federal securities laws require all but the smallest of public companies to file reports with the SEC. A company can become “public” in one of two ways — by issuing securities in an offering or transaction that’s registered with the SEC or by registering the company and its outstanding securities with the SEC. Both types of registration trigger ongoing reporting obligations, meaning the company must file periodic reports that disclose important information to investors about its business, financial condition, and management.

This information is a treasure trove for investors: it tells you whether a company is making money or losing money and why. You’ll find this information in the company’s quarterly reports on Form 10-Q, annual reports (with audited financial statements) on Form 10-K, and periodic reports of significant events on Form 8-K.

A company must file reports with the SEC if:

• it has 500 or more investors and $10 million or more in assets; or
   
• it lists its securities on the following stock markets:
   
  • American Stock Exchange
     
  • Boston Stock Exchange
     
  • Chicago Stock Exchange
     
  • Cincinnati Stock Exchange
     
  • International Securities Exchange
     
  • Nasdaq Stock Market
     
  • New York Stock Exchange
     
  • Pacific Exchange
     
  • Philadelphia Stock Exchange; or
     
• its securities are quoted on the OTCBB.

If you’d like to learn more about the SEC’s registration and reporting requirements, read Q&A: Small Business and the SEC.

All OTCBB companies must file updated financial reports with the SEC or with their banking or insurance regulators. Any company that does not file timely reports with the SEC or their banking or insurance regulators is removed from the OTCBB.

Tip:   When an OTCBB company fails to file its reports on time, the NASD will add a fifth letter “E” to its four-letter stock symbol. The company then has 30 days to file with the SEC or 60 days to file with its banking or insurance regulator. If it’s still delinquent after the grace period, the company will be removed from the OTCBB. You’ll find a list of securities that have been removed from the OTCBB at www.otcbb.com.

With few exceptions, companies that file reports with the SEC must do so electronically using the SEC’s EDGAR system. EDGAR stands for electronic data gathering and retrieval. The EDGAR database is available on the SEC’s website at www.sec.gov. You’ll find many corporate filings in the EDGAR database, including annual and quarterly reports and registration statements. Any investor can access and download this information for free from the SEC’s website. Click here if you want to view detailed instructions on how to use EDGAR.

Caution:   By law, the reports that companies file with the SEC must be truthful and complete, presenting the facts investors find important in making decisions to buy, hold, or sell a security. But the SEC cannot guarantee the accuracy of the reports companies file. Some dishonest companies break the law and file false reports. Every year, the SEC brings enforcement actions against companies who’ve “cooked their books” or failed to provide important information to investors. Read SEC filings — and all other information — with a questioning and critical mind.

Which Companies Don’t Have to File Reports With the SEC?

Smaller companies — those with less than $10 million in assets — generally do not have to file reports with the SEC. But some smaller companies, including microcap companies, may choose voluntarily to register their securities with the SEC. As described above, companies that register with the SEC must also file quarterly, annual, and other reports.

A Word About Offering Requirements

Any company that wants to offer or sell securities to the public must either register with the SEC or meet an exemption. Here are two of the most common exemptions that many microcap companies use:

• “Reg A” Offerings   Companies raising less than $5 million in a 12-month period may be exempt from registering their securities under a rule known as Regulation A. Instead of filing a registration statement through EDGAR, these companies need only file a printed copy of an “offering circular” with the SEC containing financial statements and other information. 
• “Reg D” Offerings   Some smaller companies offer and sell securities without registering the transaction under an exemption known as Regulation D. Reg D exempts from registration companies that seek to raise less than $1 million dollars in a twelve-month period. It also exempts companies seeking to raise up to $5 million, as long as the companies sell only to 35 or fewer individuals or any number of “accredited investors” who must meet high net worth or income standards. In addition, Reg D exempts some larger private offerings of securities. While companies claiming an exemption under Reg D don’t have to register or file reports with the SEC, they must still file what’s known as a “Form D” within a few days after they first sell their securities. Form D is a brief notice that includes the names and addresses of owners and stock promoters, but little other information about the company. You may be able to find out more about Reg D companies by contacting your state securities regulator. You will find the contact information for your state securities regulator at www.nasaa.org.

Unless they otherwise file reports with the SEC, companies that are exempt from registration under Reg A, Reg D, or another offering exemption do not have to file reports with the SEC. For more information about the registration requirements and offering exemptions, read Q&A: Small Business and the SEC.

What’s So Important About Public Information?

Many of the microcap companies that don’t file reports with the SEC are legitimate businesses with real products or services. But the lack of reliable, readily available information about some microcap companies can open the door to fraud. It’s easier for fraudsters to manipulate a stock when there’s little or no information available about the company.

Microcap fraud depends on spreading false information. Here’s how some fraudsters carry out their scams:

• E-mail Spam   Fraudsters distribute junk e-mail or “spam” over the Internet to spread false information quickly and cheaply about a microcap company to thousands of potential investors. Spam allows the unscrupulous to target many more potential investors than cold calling or mass mailing.
   
• Internet Fraud   Fraudsters often use aliases on Internet bulletin boards and chat rooms to hide their identities and post messages urging investors to buy stock in microcap companies based on supposedly “inside” information about impending developments at the companies. For more information about Internet fraud and on-line investing, read Internet Fraud and What You Need to Know About Trading in Fast Moving Markets.
   
• Paid Promoters   Some microcap companies pay stock promoters to recommend or “tout” the microcap stock in supposedly independent and unbiased investment newsletters, research reports, or radio and television shows. Paid promoters are generally behind the unsolicited “junk” faxes you may receive, touting a microcap company. The federal securities laws require the newsletters to disclose who paid them, the amount, and the type of payment. But many fraudsters fail to do so and mislead investors into believing they are receiving independent advice.
   
• “Boiler Rooms” and Cold Calling   Dishonest brokers set up “boiler rooms” where a small army of high-pressure salespeople use banks of telephones to make cold calls to as many potential investors as possible. These strangers hound investors to buy “house stocks” — stocks that the firm buys or sells as a market maker or has in its inventory. To learn more about cold calling, read Cold Calling Alert.
   
• Questionable Press Releases   Fraudsters often issue press releases that contain exaggerations or lies about the microcap company’s sales, acquisitions, revenue projections, or new products or services. These fraudulent press releases are then disseminated through legitimate financial news portals on the Internet.

Microcap fraud schemes can take a variety of forms. Here’s a description of the most common schemes:

The Classic “Pump and Dump” Scheme   It’s common to see messages posted on the Internet that urge readers to buy a stock quickly or to sell before the price goes down, or a telemarketer will call using the same sort of pitch. Often the promoters will claim to have “inside” information about an impending development or to use an “infallible” combination of economic and stock market data to pick stocks. In reality, they may be company insiders or paid promoters who stand to gain by selling their shares after the stock price is pumped up by the buying frenzy they create. Once these fraudsters sell their shares and stop hyping the stock, the price typically falls, and investors lose their money.

The Latest Variation of the “Pump and Dump” Scheme

Some people are finding that they have received a “misdialed” call from a stranger, leaving a “hot” investment tip for a friend. The message is designed to sound as if the speaker didn’t realize that he or she was leaving the hot tip on the wrong answering machine. If you get a message like this, it’s not a wrong number at all. Instead, it is from someone who is being paid to leave these messages on a whole lot of answering machines. Check out “Wrong Numbers” and Stock Tips on Your Answering Machine for more information and to hear one of these scams.

The Off-Shore Scam   Under a rule known as “Regulation S,” companies do not have to register stock they sell outside the United States to foreign or “off-shore” investors. In the typical off-shore scam, an unscrupulous microcap company sells unregistered Reg S stock at a deep discount to fraudsters posing as foreign investors. These fraudsters then sell the stock to U.S. investors at inflated prices, pocketing huge profits that they share with the microcap company insiders. The flood of unregistered stock into the U.S. eventually causes the price to plummet, leaving unsuspecting U.S. investors with enormous losses.

How Do I Get Information About Microcap Companies?

If you’re working with a broker or an investment adviser, you can ask your investment professional if the company files reports with the SEC and to get you written information about the company and its business, finances, and management. Be sure to carefully read the prospectus and the company’s latest financial reports. Remember that unsolicited e-mails, message board postings and company news releases should never be used as the sole basis for your investment decisions. You can also get information on your own from these sources:

• From the company   Ask the company if it is registered with the SEC and files reports with us. If the company is small and unknown to most people, you should also call your state securities regulator to get information about the company, its management, and the brokers or promoters who’ve encouraged you to invest in the company.
   
• From the SEC   A great many companies must file their reports with the SEC. Using the EDGAR database, you can find out whether a company files with us and get any reports in which you’re interested. For companies that do not file on EDGAR, check with the SEC’s Public Reference Room to see whether the company has filed an offering circular under Reg A.
   
• From your state securities regulator   We strongly urge you to contact your state securities regulator to find out whether they have information about a company and the people behind it. Look in the government section of your phone book or visit the website of the North American Securities Administrators Association to get the name and phone number. Even though the company does not have to register its securities with the SEC, it may have to register them with your state. Your regulator will tell you whether the company has been legally cleared to sell securities in your state. Too many investors could easily have avoided heavy and painful financial losses if they only called their state securities regulator before they bought stock.
   
• From other government regulators   Many companies, such as banks, do not have to file reports with the SEC. But banks must file updated financial information with their banking regulators. Visit the Federal Reserve System’s National Information Center of Banking Information site at www.ffiec.gov/nicpubweb/nicweb/nichome.aspx, the Office of the Comptroller of the Currency at www.occ.treas.gov, or the Federal Deposit Insurance Corporation at www.fdic.gov.
   
• From reference books and commercial databases   Visit your local public library or the nearest law or business school library. You’ll find many reference materials containing information about companies. You can also access commercial databases for more information about the company’s history, management, products or services, revenues, and credit ratings. The SEC cannot recommend or endorse any particular research firm, its personnel, or its products. But there are a number of commercial resources you may consult, including: Bloomberg, Dun & Bradstreet, Hoover’s Profiles, Lexis-Nexis, and Standard & Poor’s Corporate Profiles. Ask your librarian about additional resources.
   
• The Secretary of State Where the Company Is Incorporated   Contact the secretary of state where the company is incorporated to find out whether the company is a corporation in good standing. You may also be able to obtain copies of the company’s incorporation papers and any annual reports it files with the state. Please visit the National Association of Secretaries of State website at www.nass.org for contact information regarding a particular Secretary of State.
   

Caution   If you’ve been asked to invest in a company but you can’t find any record that the company has registered its securities with the SEC or your state, or that it’s exempt from registration, call or write your state’s securities regulator or the SEC immediately with all the details. You may have come face to face with a scam.

What if I Want to Invest in Microcap Stocks?

To invest wisely and avoid investment scams, research each investment opportunity thoroughly and ask questions. These simple steps can make the difference between profits and losses:

1. Find out whether the company has registered its securities with the SEC or your state’s securities regulators. 
2. Make sure you understand the company’s business and its products or services. 
3. Read carefully the most recent reports the company has filed with its regulators and pay attention to the company’s financial statements, particularly if they are not audited or not certified by an accountant. If the company does not file reports with the SEC, be sure to ask your broker for what’s called the “Rule 15c2-11 file” on the company. That file will contain important information about the company. 
4. Check out the people running the company with your state securities regulator, and find out if they’ve ever made money for investors before. Also ask whether the people running the company have had run-ins with the regulators or other investors. 
5. Make sure the broker and his or her firm are registered with the SEC and licensed to do business in your state. And ask your state securities regulator whether the broker and the firm have ever been disciplined or have complaints against them.

We’ve spelled out the questions you’ll need to ask in the following publications: Internet Fraud and Ask Questions. When you ask these questions, write down the answers you received and what you decided to do. If something goes wrong, your notes can help to establish what was said. Let your broker or investment adviser know you’re taking notes. They’ll know you’re a serious investor and may tell you more — or give up trying to scam you. We’ve developed a Form for Taking Notes to help you. You’ll find these and other useful publications on the Investor Information section of the SEC’s website or from our toll-free publications line at (800) SEC-0330.

Also, watch out for these “red flags”:

• SEC Trading Suspensions   The SEC has the power to suspend trading in any stock for up to 10 days when it believes that information about the company is inaccurate or unreliable. Think twice before investing in a company that’s been the subject of an SEC trading suspension. You’ll find information about trading suspensions on the SEC’s website.
   
• High Pressure Sales Tactics   Beware of brokers who pressure you to buy before you have a chance to think about and investigate the “opportunity.” Dishonest brokers may try to tell you about a “once-in-a-lifetime” opportunity or one that’s based on “inside” or “confidential” information. Don’t fall for brokers who promise spectacular profits or “guaranteed” returns. These are the hallmarks of fraud. If the deal sounds too good to be true, then it probably is.
   
• Assets Are Large But Revenues Are Small   Microcap companies sometimes assign high values on their financial statements to assets that have nothing to do with their business. Find out whether there’s a valid explanation for low revenues, especially when the company claims to have large assets.
   
• Odd Items in the Footnotes to the Financial Statements   Many microcap fraud schemes involve unusual transactions among individuals connected to the company. These can be unusual loans or the exchange of questionable assets for company stock that may be discussed in the footnotes.
   
• Unusual Auditing Issues   Be wary when a company’s auditors have refused to certify the company’s financial statements or if they’ve stated that the company may not have enough money to continue operating. Also question any change of accountants.
   
• Insiders Own Large Amounts of the Stock   In many microcap fraud cases — especially “pump and dump” schemes — the company’s officers and promoters own significant amounts of the stock. When one person or group controls most of the stock, they can more easily manipulate the stock’s price at your expense. You can ask your broker or the company whether one person or group controls most of the company’s stock, but if the company is the subject of a scam, you may not get an honest answer.

Additional Red Flags   Don’t deal with brokers who refuse to provide you with written information about the investments they’re promoting. Never tell a cold caller your social security number or numbers for your banking and securities accounts. And be extra wary if someone you don’t know and trust recommends foreign investments. For more tips on avoiding danger, be sure to read Cold Calling and The Fleecing of Foreign Investors.

What If I Run Into Trouble?

Act promptly! By law, you only have a limited time to take legal action. Follow these steps to solve your problem:

1. Talk to your broker and explain the problem. What happened? Who said what, and when? Were communications clear? What did the broker tell you? Did you take notes about what your broker said at the time? If so, what do your notes say?
    
   Note: If you believe your broker engaged in unauthorized transactions or other serious frauds, be sure to put your complaint in writing right away and send it to the firm. Your written complaint may be the only way to prove that you complained to the firm about unauthorized transactions. For more information about unauthorized transactions, please read our “Fast Answer” on that topic.
    
2. If your broker can’t resolve your problem, then talk to the broker’s branch manager.
    
3. If the problem is still not resolved, put your complaint in writing and send it to the compliance department at the firm’s main office. Explain your problem clearly, and tell the firm how you want it resolved. Ask the compliance office to respond to you in writing within 30 days.
    
4. If you’re still not satisfied, then send a letter to your state securities regulator and attach copies of any letters you’ve sent already to the firm. Or send your complaint to the SEC using our online complaint form.

We will forward your complaint to the firm’s compliance department and ask that they look into the problem and respond to you in writing.

Please note that sometimes a complaint can be successfully resolved. But in many cases, the firm denies wrongdoing, and it comes down to one person’s word against another’s. In that case, we cannot do anything more to help resolve the complaint. We cannot act as a judge or an arbitrator to establish wrongdoing and force the firm to satisfy your claim. And we cannot act as your lawyer.

http://www.sec.gov/investor/pubs/microcapstock.htm

The term “penny stock” generally refers to low-priced (below $5), speculative securities of very small companies. While penny stocks generally are quoted over-the-counter, such as on the OTC Bulletin Board or in the Pink Sheets, they may also trade on securities exchanges, including foreign securities exchanges. In addition, penny stocks include the securities of certain private companies with no active trading market.

Before a broker-dealer can sell a penny stock, SEC rules require the firm to first approve the customer for the transaction and receive from the customer a written agreement to the transaction. The firm must furnish the customer a document describing the risks of investing in penny stocks. The firm must tell the customer the current market quotation, if any, for the penny stock and the compensation the firm and its broker will receive for the trade. Finally, the firm must send monthly account statements showing the market value of each penny stock held in the customer’s account.

Penny stocks may trade infrequently, which means that it may be difficult to sell penny stock shares once you own them. Because it may be difficult to find quotations for certain penny stocks, they may be impossible to accurately price. Investors in penny stocks should be prepared for the possibility that they may lose their whole investment.

For more information, read the penny stock rules section of our Broker-Dealer Registration Guide. You may also want to review the penny stock rules (Securities Exchange Act Rules 3a51-1 and 15g-1 through 15g-100).

Before you consider investing in the stock of any small company, be sure to read our brochure, Microcap Stock: A Guide for Investors.

http://www.sec.gov/answers/penny.htm