Hey guys, in this video I want to go over a very important concept related to penny stocks that a lot of people tend to forget or especially people new to penny stocks and new to the, these OTC B and pink sheet stock markets, they don't realize about some of these companies. And the fact of the matter is that pretty much 99% of these companies are garbage, okay? These companies are not successful companies. There's a reason they trade on these pink sheet or OTC Vivi stocks, markets and even some of these companies that trade on the NASDAQ. These are companies that are in loss, they're in huge amounts of debt. They don't have proper cash flow.

Maybe they have a legitimate Board of Directors, because that's what they need when they're trying to create and go do the reverse IPO. But in general, one of the most important rules is to never believe In the story of the company, okay, never believe in their products and never believe in pretty much any thing that they say. I mean, that's kind of pessimistic, but, but you have to realize unless they come up with a contract and official contract that they file an 8k, which is an SEC filing. And they it's very public information that they do something, then it's probably not true. And let me go through a few examples of these penny stock companies so that you can understand because what happens is that, um, this is exactly one of the reasons why people lose money in the stock market in the penny stock market is because they tend to believe the company and they tend to go long with these companies and they try to think of these companies and investments and they're gonna be the next Google or the next.

Facebook whether the company stock is going to shoot up and they're gonna make tons of money. And the fact of the matter is that that never happens. And I think I think it was a Timothy Sykes was said that pretty much the only time or the only penny stock that ever actually made it is true religion jeans and that's pretty much it all of these other other companies, you know they go up because of pumping dumps and hype and scheme and borderline manipulation and fraud and then they just collapse. Again I said 99% of these stocks Okay, so you know if you find the 1% Congratulations, I was wrong but you know, you'll only know if that's true if you do hours and hours of research and their SEC filings and in the industry and if you you know, listening to onto their conference calls and even then, you these companies, for the most part, don't have it.

And if you don't believe me, let me go through a few examples right now. So this is the ticker x GTI. This is even trading on a bit more of a legitimate NASDAQ board. This the NASDAQ in order for a stock to be traded on this. They do they have to follow more compliance laws. They have to disclose more disclosures so this is even considered a bit more legitimate but let's go through you know, say they developed communications technologies, the they have intellectual property and proprietary software algorithms, voice, MTA and Internet Protocol.

They have all these different software's you know, x mod allows users of Wi Fi enabled smartphones, tablets, notebooks to access the internet through the cognitive radio, you know, they have XM, see, they have a lot of branded software as products, okay? The company sells its intellectual property and the equipment directly as well as through an indirect channel. And even they go on, they've been around for a long time. But the thing though, is that when you actually dig deeper, you can see that these companies are just like, are just pretty much dying. So let me show you the financials of this company. Let me move this right here.

So when you look into the financials of this company, you can see that in 2012, they had an operating loss of $13 million. And then it's not even like this company is getting any better. They now this year 2013, they have a $14 million loss. Okay, netting, and that's sorry, that's just their operating, okay. But after you take into account, they're entitled entire business operations. At the end of the year they're in debt or they lost $28 million.

And yet, if you look into the value of the company, which is called the market cap, sorry, let me move this over. You can see that the company is worth $54 million, the market cap worth $54 million, even though they lost $27 million in a single year. So that's just one example. And pretty much 98 90% of these companies are like this. Some of them don't even generate revenue. Most of them are operating in losses.

And the thing is, you need To understand that you can't invest in these companies for the long term, you know, they might have their own stories, the Board of Directors might constantly promote the products and that's their job. That's their responsibility. they're required to do that. Okay? Even the day before they go bankrupt, the board of directors have to say, the company is doing fine, you know, we're gonna pull through this. But you have to understand that when you look into the actual fundamentals of the company, these companies are pretty much all garbage.

But let's just go through a bit more as a CIO, because I don't want you guys to fall into the trap of ever buying into one of these companies for the long term. You know, none of these companies are going to make it. So I don't mean to be pessimistic, but all of these companies are going to fall and collapse. And if, if you look at a penny stock that's actively traded now, it's probably going to be worth a few cents a year from now because they just come and go, everyone forgets about them. The shareholders dump their shares And that's pretty much what happened. So let's look at this another one SP Li.

If you go into the business summary, okay, they they're in pretty, you know, strong markets, aviation, aerospace, government, defense markets, okay. serves a range of clients, aircraft, leasing companies airlines, founded in 2004. Okay. So you would think that oh, you know, this is a legitimate company, but again, when we go into their financials, you can see that they're constantly losing money. Okay, last year, they lost $63 million. I mean, $63,000 and now this year, they lost $236,000.

So they're exponentially losing money. And finally, let me show you the last company. You know, this is called EDI index Corp, EDI xe. Again, it offers em three hub again, it has a whole bunch of software and everything. But some of these companies are don't even know To have revenue streams, you can see this company, this company hasn't even had any revenue for the last three years. So as I move this over, look at that 2012 no revenue, no revenue, okay?

And they're just, you know, they're just operating at a loss at $9,000 loss last year $230,000 a year before, I mean, this year, and let's just see their market cap real quick. I don't even know if it's gonna show the market cap. No, but but the way you can do the market cap again, to find the value of the company, you just take the share price and you multiply it by the amount of shares available, which usually you can see in key statistics. When you're using Yahoo Finance, but again, this company it barely barely disclose anything that's probably traded on a pink sheet. So they don't even have legitimate information. But if you look, if you try to, if you fall into the hype and everything this company might be, they people might believe that they have the most amazing product but and the reason I want To remind you guys of this both newbie and advanced traders, because I've heard advanced traders even sometimes, you know, buying into this, you know, they forget that these companies are all garbage and sometimes they go long these stocks and then, you know, they break one of the rules.

That's one of the reasons why, you know, advanced traders and experienced traders lose money, you know, you think, oh, if there's a technique to this whole thing, why do some traders still lose money and that's because that's only when you break your rules. And so, I want you guys to know that one of the most important rules is to never fall into the hype, or buy into the story of any company just treat it. You know, Tim Brittani has a great saying I don't trade the company I trade the ticker or you know, sorry I misquoted that but is the basic premise is that you only want to just focus on the stock and the chart pattern. That's it. Forget about the company forget about what they say forget about what they're promoting. Forget about their industry.

Use those forces. factors you know, for example, Weed Stocks are going up, you know, fuel cells are going down right now they're crashing, but for the most part, never buy into the hype. And just remember that most of these companies 99% of them are just manipulated by hype. And all you have to do is learn if you watch my other videos, learn how to profit off of that.