Current General Market Overview

[David Randolph]

Everything is going as expected when I wrote «A reason NOT to be a Bear», the SPX and the NDX are at 2005 highs:

SPY chart:



NDX chart:



Yesterday the FED minutes signaled that maybe an end to the rising interest rates cycle is near: Fed may change language soon

This may be the catalyst for the end of the year rally we've been waiting for, and that is already happening. So, everything is fine now, I want to continue full invested at the 3 Stocks on Fire Portfolio for some time to come.

Remember how I went to see what commercials and speculators were doing and that made me bullish near the market bottom? Well, the situation isn't so bullish anymore, speculators are starting to cover and go long and commercials are going from long to short again. But it is still a mixed picture, so I expect the bull run to continue for some time, but maybe not so much time as most people are expecting.

But I have a serious problem to deal with. It's the 3 Pennies on Fire Portfolio. It's going down everyday, and I've been thinking a lot about it. I come to the conclusion that I made several mistakes there:

1) Thinking of individual issues instead of basic conditions

We've been watching many stocks traded on the NYSE and the Nasdaq which are very undervalued, and yet, sometimes, nobody is looking. What to think of penny stocks? Fundamentals can be great at a micro cap company, but in the current market environment, nobody cares about penny stocks.

When the market was mixed to down, a few months ago, people were spread across all sectors, trading in and out. But now the general market is in bullish mode, and medium and large caps are the ones outperforming, penny stocks were forgotten, for now.

On my exploring and filtering of my 11,000 stocks database, I seldom find penny stocks now. Rallies usually fizzle.

But at the end of every bull run I've seen there was a rush on penny stocks, it's always the same thing, pennies rising 50, 100% a day and everybody going crazy about them and about speculation.

What I fear now is that my 7 penny stocks go down even more and later they're not the ones that will take off. Probably it would be wiser to stay in cash until the opportunity clearly arises and then strike in full force, buying and selling penny stocks with momentum behind them. This opportunity I'm talking about may come in 1 or 2 months.

But I made another serious mistake, and that was on EYII.OB:

2) I've been reading Reminiscences once again, and Livermore talks about something called an «inverted tip». I didn't take any inverted tip, but I did an «inverted analysis». You see, I'm learning like everybody else on this website, and didn't knew I was doing this. It is a valuable lesson for the future, and my individual tuition fee will be less than $2,000. Unfortunately, if we compound everybody on this website, I think the cost is higher 

An «inverted analysis» is to explain a down trend with a temporary hypothesis. «The stock is down, but that's due to this temporary effect, it will soon be up». This kind of analysis distorts the fact that the stock is in a downtrend and that's never a bullish thing.

So, from now on, I will never explain a downtrend with a temporary hypothesis (a downtrend is different than a down move in an uptrend).

I've been watching the homepage and seeing the penny stock portfolio heading down, and EYII.OB is not letting me sleep, even though I have little money in it, it's not about the money, it is that I was dead wrong and didn't correct the mistake !!!!

As you can read here:

«Losing money is the least of my troubles. A loss never bothers me after I take it. I forget it overnight. But being wrong - not taking the loss - that is what does the damage to the pocketbook and to the soul.»

My soul is hurt. I need to clean up, consolidate and start over again when the opportunity arises. So I will ask Ramsburg to liquidate all penny holdings of the 3 Pennies on Fire for me during today's session. Hopefully the portfolio will still be positive, it closed with a profit of 17% yesterday.

But I want to learn something more out of this negative experience. I want a new tool. I said I made the mistake of thinking of individual issues instead of basic conditions. But, how can a man analyze basic conditions in penny stocks, when there's not an accurate index of them that I know of?

I will ask Ramsburg to join me in the making of a penny stock index to be published at 3 Stocks on Fire.

Thank you for reading, I wish you good trades !

[stocky]

Again a great analysis and wow thats like seeing the big picture and big move at the same time. Keep it up.

[fill_the_gap]

David & Frederick,

What makes this site is your honesty.

The ability to admit mistakes without blaming outside events.

Everybody makes mistakes.  It takes class and humility to admit them.
The market would not be a game if it were always predictable.

Your discipline to trade a plan is admired !

You both have earned my respect.  Applaud ! 

[gmarc66]

Ok, so just to be clear...EYII will most likely not recover? it is on a downtrend and no news will make it run?

[i]David Randolf quote:
"I've been watching the homepage and seeing the penny stock portfolio heading down, and EYII.OB is not letting me sleep, even though I have little money in it, it's not about the money, it is that I was dead wrong and didn't correct the mistake !!!!"[/i]

Please advise.

thanks very much

julia

[wrangler]

Hi gmarc66
Seen where you have posted a few times asking for advise on EYII. I'll give you my 2 cents worth but I don't have shares in this stock so I'm just giving my opinoin. I don't know what you gave for you're shares and how many you bought and it's none of my business but if you stand to lose a great amount of money you may want to hold till you can gain some of it back.
My opinoin,I read their Quarterly report given on Nov. 21, 05 and they lost money compared for same time last year so if this filtration product that they are promoting in China doesn't work out I don't see this company rebounding anytime soon and according to their last news release it will be anywhere from 5 to 6 weeks to get news out,here's a clip and full news release. Sounds like you've got a major decision to make,Sell and accept you're loss or hold and wait for the rebound. Goodluck hope it works out for you

Over the next 5-6 weeks, a senior EYI consultant will be traveling throughout Southern China to assist in educating the staff and regional managers of CEIEC on the features and benefits of Code Blue(tm).EYI Hong Kong Management Meet with CEIEC Top Executives
Thursday November 17, 11:27 am ET


BURNABY, British Columbia, Nov. 17, 2005 (PRIMEZONE) -- EYI Industries Inc. (``EYI'') (OTC BB:EYII.OB - News), (http://www.stopdrinkingpoison.com), a marketer of products that promote well-being and a healthy lifestyle, is pleased to announce that Essentially Yours Industries (Hong Kong) (``EYI HK''), president and CEO, Dori O'Neill, and a senior EYI consultant met with top executives of Guangzhou CEIEC Enterprise (Group) Co. Ltd. (``CEIEC'').
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On Saturday November 12, 2005, Mr. Dori O'Neill and a senior EYI consultant, met with five CEIEC senior executives including Mr. Zhang Jiang, president and CEO, Mr. Yu, executive vice president and Mr. He Bing Gui, vice general manager. The purpose of their meeting was to further discuss the marketing strategy for the Code Blue(tm) portable water filtration system in order to ensure successful penetration into the Asian market. CEIEC is currently proceeding with the Code Blue(tm) dual trade mark registration and ensuring that all products meet the requirements for sales in China.

Over the next 5-6 weeks, a senior EYI consultant will be traveling throughout Southern China to assist in educating the staff and regional managers of CEIEC on the features and benefits of Code Blue(tm).

EYI has also hired C&E Translation & Advertising Inc. to translate http://www.codebluewater.com into Mandarin and Cantonese. EYI is currently preparing to launch the translated Code Blue(tm) website which will then be linked to CEIEC's website.

Essentially Yours Industries (Hong Kong) president and CEO, Dori O'Neill stated, ``We are truly honored that CEIEC has given us permission to link directly to the CEIEC website. We are the first vendor to have been afforded such an honor. We are very pleased with the progress that we have made to date with CEIEC and are looking forward to a successful partnership.''

This press release is available on the company's official online investor relations site for investor commentary, feedback and questions. Investors are asked to visit the EYI Industries IR Hub located at http://www.agoracom.com/IR/EYI. Alternatively, investors can e-mail AGORA Investor Relations directly at [email protected].

About EYI (http://www.stopdrinkingpoison.com)

EYI Industries Inc., through our subsidiary Essentially Yours Industries, Inc. (EYI), markets products that promote health and well-being. Recently, EYI launched a consumer product that removes arsenic and other contaminates to a negligible level from drinking water. The portable water filtration product's name is Code Blue(tm) and is exclusively provided to EYI. In addition, EYI sells dietary supplements and personal care products. A large portion of our sales are from CALORAD(t), a liquid protein supplement that has brought weight loss benefits to our customers. More than six million bottles of CALORAD(r) have been sold since EYI was founded in 1995. Our newest product, PROSOTEINE(r), is experiencing similar success to CALORAD(r) and bringing our customers the benefits of a natural energy drink.

21-Nov-2005

Quarterly Report



ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
FORWARD LOOKING STATEMENTS

The information in this discussion contains forward-looking statements. These forward-looking statements involve risks and uncertainties, including statements regarding EYI's capital needs, business strategy and expectations. Any statements contained herein that are not statements of historical facts may be deemed to be forward-looking statements. In some cases, you can identify forward-looking statements by terminology such as "may", "should", "expect", "plan", "intend", "anticipate", "believe", "estimate", "predict", "potential" or "continue", the negative of such terms or other comparable terminology. Actual events or results may differ materially. In evaluating these statements, you should consider various factors, including the risks outlined in the Risk Factors section below, and, from time to time, in other reports we file with the Securities and Exchange Commission (the "SEC"). These factors may cause our actual results to differ materially from any forward-looking statement.

OVERVIEW

We are in the business of selling, marketing, and distributing a product line consisting of approximately 24 nutritional products in two categories, dietary supplements and personal care products. Our most successful product is Calorad, a liquid collagen-based dietary supplement presently available on the market. These products are marketed through a network marketing program in which IBAs (Independent Business Associates) purchase products for resale to retail customers as well as for their own personal use. We have a list of over 380,000 IBAs, of which approximately 9,100 we consider "active". An "active" IBA is one who purchased our products within the preceding 12 months. Over 1,300 of these IBAs are considered "very active". A "very active" IBA is one who is on our automatic Auto-ship Program and is current with their annual administration fee. Our Auto-ship Program allows our IBAs to set up a reoccurring order that is automatically shipped to them each month.

The IBAs in our network are encouraged to recruit interested people to become new distributors of our products. New IBAs are placed beneath the recruiting IBA in the "network" and are referred to as being in that IBA's "down-line" organization. Our marketing plan is designed to provide incentives for IBAs to build, maintain and motivate an organization of recruited distributors in their down-line organization to maximize their earning potential. IBAs generate income by purchasing our products at wholesale prices and reselling them at retail prices. IBAs also earn commissions on product purchases generated by their down-line organization.

On an ongoing basis we review our product line for duplication and sales trends and make adjustments accordingly. As of September 30, 2005, our product line consisted of: (i) 18 dietary supplement products; and (ii) 6 personal care products consisting primarily of cosmetic and skin care products. Our products are primarily manufactured by Nutri-Diem, Inc., a related party, and sold by us under a license and distribution agreement with Nutri-Diem. Certain of our own products are manufactured for us by third party manufacturers pursuant to formulations developed for us. Our products are sold to our IBAs located in the United States and Canada.

We believe that our network marketing system is suited to marketing dietary supplement and personal care products, because sales of such products are strengthened by ongoing personal contact between IBAs and their customers. We also believe that our network marketing system appeals to a broad cross-section of people, particularly those looking to supplement family income or who are seeking part-time work. IBAs are given the opportunity, through our sponsored events and training sessions, to network with other distributors, develop selling skills and establish personal goals. We supplement monetary incentives with other forms of recognition, in order to motivate IBAs.

Recent Corporate Developments

We experienced the following significant developments since the completion of our last fiscal quarter ended June 30, 2005:

1. On August 28, 2005 we incorporated a wholly owned subsidiary, EYI HK. The EYI HK office consists of the entire 15th floor in a centrally located building at No. 1 Minden Avenue, Tsim Sha Tsui, Kowloon. The office is intended to be used to service distributors and provide a product pick up depot for Code Blue(tm), Calorad(r), Prosoteine(r) and the newest EYI product, Calorad Cream. The new office will also play a role in supporting the sales, distribution and logistics of the CEIEC agency agreement. In connection with opening our new office in Hong Kong, on September 28, 2005 EYI HK entered into a Lease with Dombas Estates Limited for the lease of office space located at Nos. 1-3, 15th Floor of No. 1 Minden Avenue, Tsim Sha Tsui, Kowloon. The lease is for a two year term at a monthly rent of approximately $3,500 USD (HK$22,920).

2. On September 23, 2005, EYI HK entered into an agency agreement (the "Agency Agreement") with Guangzhou Zhongdian Enterprises (Group) Co. Ltd. ("GZE") and China Electronics Import and Export South China Corporation ("CEIEC"). Pursuant to the terms of the Agency Agreement, EYI HK granted to CEIEC and its wholly owned subsidiary GZE, the exclusive right to distribute EYI's Code BlueTM water filtration systems (the "Water Filtration Systems") in China for a period of two years subject to, among other things, the following conditions: (i) CEIEC purchasing a minimum of 4,000,000 Water Filtration Systems in each year commencing in 2006; (ii) EYI HK issuing an exclusive agency certificate to CEIEC confirming the grant of agency rights; (iii)EYI HK guaranteeing the safety of its products to be sold on the Chinese market and that the packaging specifications will meet the product safety standard and packaging standards as required in China; (iv) CEIEC committing to the purchase (the "Purchase Plan"): of the amount of Water Filtration Systems outlined in the following purchase plan; (v) If, in any year CEIEC purchases fewer than 4,000,000 Water Filtration Systems in the Purchase Plan it will cease to have the exclusive agency rights to the Water Filtration Systems but continue to be non-exclusive agents of EYI HK; (vi) If, in any year CEIEC purchases fewer than one-half of the Water Filtration Systems in the Purchase Plan, EYI HK may at its option adjust the price of the Water Filtration Systems supplied to CEIEC under the Purchase Plan; and (vii) CEIEC agree to obtain all required regulatory approvals in China relating to the marketing and distribution of the Water Filtration Systems. Pursuant to the terms of the Agency Agreement, CEIEC reserves the right, upon reasonable notice to EYI HK, to increase, or decrease the number of Water Filtration System units that it purchases under the Purchase Plan, based on its evaluation of market demand in China, and agreed to commence purchases under the Purchase Plan in October 2005, and place subsequent purchase orders on a quarterly basis. The parties agreed that CEIEC may upon reasonable notice to EYI HK, assign its interest in the Agency Agreement to its nominee company, but remains a party to the agreement notwithstanding any such assignment.

3. EYI HK entered into a Logistics Management Agreement dated September 1, 2005 with All In One Global Logistics Ltd. to provide international freight, warehousing and distribution services in Hong Kong for a period of two years.

4. On September 1, 2005, EYI entered into an agreement for legal services with M. Ali Lakhani Personal Law Corporation (the "Contractor") to provide EYI and its subsidiaries with certain legal services in exchange for a monthly fee of US$8,000 and a one time issuance of 500,000 restricted shares of our common stock to the Contractor or its nominee, pursuant to Regulation S of the Securities Act of 1933. The contract is on a month-to-month basis.

5. We entered into an investor relations agreement (the "IR Agreement") dated as of July 28, 2005 with AGORA Investor Relations Corp. ("Agora"), a private company incorporated under the laws of Ontario, Canada. Pursuant to the terms of the agreement Agora agreed to provide certain services including marketing, branding and investor communications services, in consideration of which we agreed to: (i) pay Agora a fee of $2,500 per month commencing August 1, 2005; and
(ii) issue to Agora warrants to be registered by us to purchase 350,000 shares of our common stock exercisable at a price of $0.06 per share and vesting over a twelve month period. The Agreement is for an initial term of August 1, 2005 to July 31, 2006 and is renewable at EYI's option for an additional term of 12 months under the same terms and conditions. On October 5, 2005 we amended the IR Agreement with Agora. The IR Agreement was amended to provide for the issuance of 250,000 restricted shares of our common stock in place of the warrants to be received by Agora initially under the IR Agreement. The shares were issued pursuant to Regulation S of the Securities Act of 1933 and Canadian National Instrument 45-106 on the basis that Agora is an accredited investor.

We intend over the next twelve months to undertake the following:

New Product Introduction. In May 2005, we entered into a 5 year exclusive Reseller Agreement with Metals & Arsenic Removal Technology, Inc ("MARTI"). The Reseller Agreement offers EYI exclusive network marketing rights of a reformulated version of the MARTI products. The MARTI units are a portable water filtration product that have been tested in an EPA accredited laboratory and tests concluded that the filtration unit effectively treats and removes arsenic from water supplies. In June 2005, we initiated our pre-launch program for the MARTI products, now named Code Blue(TM). Shipments of this product began in August 2005.

International Sales. We see international sales as a key component for our growth in the next 5 years. During our second quarter of fiscal 2004, we entered into a joint venture agreement (the "JV Agreement") with World Wide Buyers' Club Inc. ("WWBC") and Supra Group, Inc. ("Supra Group"), dated as of May 28, 2004, for the purpose of jointly marketing and distributing our products through the existing Supra Group distribution system in the Latin American countries identified in the JV Agreement and the products of Supra Group using the existing EYI distribution system to residents in the U.S. We believe Supra Group has significant international experience, expertise and contacts and that this alliance will assist in our ability to expand into Spanish-speaking countries.

Over the next twelve months we intend to expand our operations into the Asian market. In June 2005, we secured the consulting services of Ms. Eliza Fung who will primarily assist in the entry and development of EYI into the Asian market. In August 2005 we incorporated a new company, Essentially Yours Industries (Hong Kong) Limited and in September 2005 we opened an office in Hong Kong. The office is intended to be used to service distributors and provide a product pick up depot for Code Blue(TM), Calorad(R), Prosoteine(R) and the newest EYI product, Calorad Cream. The new office will also play a role in supporting the sales, distribution and logistics of the CEIEC agency agreement.

Network Support. We intend to expand the marketing of our Calorad product by internet direct and the distribution network. We also intend to support the growth and expansion of the Sales Communication department. Their success is measured on the number of inactive IBAs who, through the efforts of the Sales Communication department, become current with their membership fees and purchase our products. As the revenues generated by this department grow, we intend to add additional staff. Also, over the next twelve months we intend to promote our Autoship Program by offering one or more of the following: initial incentives, purchase discounts, and long-term commitment rewards. We believe that our automated ordering system supports on-going sales.


RESULTS OF OPERATIONS

Third Quarter and Nine Months Summary

                                       Third Quarter Ended September 30                Nine Months Ended September 30
                                  -----------------------------------------      -----------------------------------------
                                     2005           2004        Percentage         2005           2004          Percentage
                                                                 Increase /                                     Increase /
                                                                (Decrease)                                      (Decrease)
Revenue                           $1,335,963     $1,349,170        (0.98%)       $3,850,246     $4,769,608       (19.28%)
Cost of Goods Sold                $  350,188     $  249,634        40.28%        $  840,125     $  956,567       (12.17%)
Gross Profit before commission    $  985,775     $1,099,536       (10.35%)       $3,010,121     $3,813,041       (21.06%)
expense
Commission expense                $  513,449     $  545,747        (5.92%)       $1,435,911     $2,000,401       (28.22%)
Gross Profit                      $  472,326     $  553,789       (14.71%)       $1,574,210     $1,812,640       (13.15%)
Gross Profit Margin                   35.35%         41.05%       (13.87%)           40.89%          38.0%        7.58%




Revenues

During the three months ended September 30, 2005 we had total revenues of $1,335,963 as compared to revenues of $1,349,170 for the same period in 2004 which represents a decline of $13,207 or 1%. The year-to-date results for 2005 compared with 2004 indicate a revenue decline of $919,362 or 19%. The decrease in our revenues can be primarily attributed to the following factors:

o Our inability to attract new IBA's

o Lack of IBA participation in our auto-ship program

o our inability to fund marketing initiatives and programs that may promote growth within new markets and existing ones

Gross Profit

During the three months ended September 30, 2005 as compared to the same period in 2004, we had gross profits of $472,326 and $553,789 respectively. This represents a decline of $81,463 or 15%. The year-to-date results for 2005 compared with 2004 indicate that the gross profit has declined $238,430 or 13%. The decline in our gross profit is primarily attributed to our decreased sales.


Expenses

Operating expenses:

The following table summarizes operating expenditures for the periods indicated:

Operating Expenses

                                -------------------------------------------    ------------------------------------------------
                                     

[gmarc66]

Thanks for your comments Wrangler Appreciate it

Actaully, i did sell my shares awile ago at a loss, but, i have a friend who is still holding..and now holding at a considerable loss. So, just hoping to inform them as much as possible.

Thanks very much..hope all ur trades are good ones

julia

[David Randolph]

Again a great analysis and wow thats like seeing the big picture and big move at the same time. Keep it up.

Thanks stocky 

David & Frederick,

What makes this site is your honesty.

The ability to admit mistakes without blaming outside events.

Everybody makes mistakes. It takes class and humility to admit them.
The market would not be a game if it were always predictable.

Your discipline to trade a plan is admired !

You both have earned my respect. Applaud !

Thanks fill_the_gap, we respect you too, and we want to thank you for all the help you've been giving to this website 

Ok, so just to be clear...EYII will most likely not recover? it is on a downtrend and no news will make it run?

[i]David Randolf quote:
"I've been watching the homepage and seeing the penny stock portfolio heading down, and EYII.OB is not letting me sleep, even though I have little money in it, it's not about the money, it is that I was dead wrong and didn't correct the mistake !!!!"[/i]

Please advise.

thanks very much

julia

I still hold what used to be $1,000 in EYII.OB from the $1,000,000 experience and I think EYII.OB will rebound (possibly even enter a bullish trend) when positive news from China and the Code Blue arrive.

Good luck for your friend, and for me julia 

[gmarc66]

Thanks David!

and good luck to you to on EYII!

julia