Last week’s pick HENL rocketed intra week to 56 cents up 125% from our profile price of 25 cents on Sunday, January 14. HENL closed Friday at 25 cents… Stockprowler anticpates word on the FDA approval could come as early as mid-February based on the typical 90 day waiting period from the date of filing. If HENL does get approval… things could get crazy with the stock price. Keep in mind this is a very high risk speculation.

Stockprowler’s pick this week is…

SteelCloud Company (NasdaqNM:SCLD)

Corporate Web Site: http://www.steelcloud.com

Shares Outstanding: 9.8 million

Public Float: 6.6 million

Insider Ownership: 32%

Institutional Ownership: (12) 4%

Market Capitalization: $10.4 million

Closing Price Friday: $1.06

     The Internet is changing the way the world does business. To survive in this rapidly moving environment, companies must be quick to implement new business applications. This demand for rapid implementation along with an increasingly complex technology has created a burgeoning market for turnkey network application solutions that can deliver immediate results for the business customer.

     This week’s pick, SteelCloud Company (NasdaqNM:SCLD) headquartered in Dulles, Virginia, develops custom-designed, pre-configured network application and infrastructure server appliances. Each appliance includes hardware designed and manufactured by SteelCloud running Microsoft NT or Linux. SteelCloud then

integrates complex network application programs, from some of the world's finest software manufacturers, and creates an optimized, tested and certified appliance ready-to-deploy and use when it arrives at the customer's site. Hardware manufacturing takes place at SteelCloud's Puerto Rican, ISO 9002 manufacturing facility. Marketing is conducted in concert with the software manufacturers. The turnkey server appliances are sold to customers in the commercial, government and OEM markets. SteelCloud products include a variety of high performance network/infrastructure servers, a web-caching appliance, remote application server, firewall appliance, backup server, help-desk appliance and a network attached storage appliance.

     In addition, SteelCloud, through its Puerto Rico Industrial Manufacturing Operations (PRIMO) division in Guayama, Puerto Rico, manufactures notebook and desktop computers. PRIMO also provides contract manufacturing services for companies who want to serve the Puerto Rican market through a Puerto Rican manufacturer with localized services. PRIMO is also an indigenous supplier of computers and IT services in Puerto Rico. As part of the local community, the PRIMO facility qualifies for incentives when bidding on Government contracts. PRIMO augments its computer products with localized, bi-lingual IT services such as training, maintenance and consulting. In fiscal 2000, Steelcloud PRIMO was chosen as a major supplier to the Puerto Rican Board of Education and received a $16.5 million contract award from the Puerto Rican Government.

     SteelCloud also provides network analysis, design, and implementation services primarily in the form of short-term (less than three months) projects. Specific completion criteria are achieved and deliverables submitted to signify the end of the project. These network-engineering services are performed for a fixed-fee upon completion or on an hourly labor basis at the pre-negotiated price and estimated levels of effort. Specific project-based services that the company performs include network design, systems implementation, integration, network security, software migrations, and messaging system implementation. In addition, the company provides network support services to clients in the form of fixed-rate hourly engineering services. Contracts with commercial and government clients typically range from one month to one year in length. Staffing services consist of placing one or more network engineers, user support technicians, or programmers on-site with a client. These professionals perform work as a "virtual" employee for the client and typically work under the direction and changing needs of the client's management. The company provides skilled technical professionals to its customers, along with technical support from its vendor partners such as Microsoft, Novell, Cisco, and Network Associates.

     On January 23, SteelCloud reported ending fiscal 2000 with a fourth consecutive profitable quarter and announced revenues of $39,766,393 for the twelve-month period ended October 31, 2000. Revenues for the year ended October 31, 1999 were $34,475,297. Gross profit for fiscal 2000 increased 10% to $7.1 million from $6.5 million. Net income, before dividends, for fiscal 2000 was $800,655. Commenting on the company’s growing business, CEO Thomas P. Dunne stated, “Unlike volatile, high tech startups, high flyers and dot coms, SteelCloud has been in business 14 years (13 of which were profitable). We're a solid enterprise with real revenues, profits and a stable, growing business base. Further, over the past year, we've literally reinvented ourselves with exciting new products, markets and partners ... and become a new company in both name and deed. We'll continue our profitable ways, improve the balance sheet and make sure the investment community is aware of our

successes. All things considered, without question, our current stock price is absurdly low.”

      The company has no long-term debt, however in March 2000, the company sold 3,000 shares of its Series A Convertible Preferred Stock to one investor. In connection with the sale, the Company received an aggregate of $3,000,000. The sale was executed to obtain capital to fund current and future operations and to settle an arbitration award with a former company employee. The conversion of these convertible preferred shares to common may prove nettlesome to the company and its shareholders… 150 preferred shares have recently been converted into 157,553 common shares. The potential exists for as many as 3,000,000 more shares of common to be issued to the holder of the remaining 2,850 preferred shares. The company would be well advised to buy back the unconverted preferred shares as soon as possible to avert undesirable stock dilution. The company could be in a position to do this soon as it is awaiting the outcome of litigation involving a terminate-for-convenience issuance by the U.S. Air Force with regard to an earlier contract with the company. Under a termination-for-convenience, the government is required generally to reimburse a contractor for all costs incurred in the performance of the contract… The settlement may likely be in the millions of dollars.

Stockprowler believes SCLD to be an excellent investment for a number of reasons:

• The company is profitable and undervalued. Look at competitors COBT, NENG, and CRYS… Cobalt’s revenues are about twice that of SCLD. They have 3 times the as many employees and the company is not profitable. For the quarter ending September 29, 2000 they reported a loss of $12.2 million. Cobalt was recently bought out by Sun Microsystems in a $2 billion dollar deal.

• SteelCloud’s new Model 1000 outperforms all other 1U servers on the market today and with prices starting as low as $1,795.

• EDS, the winner of a huge Federal contract award, is a client of SCLD. SCLD and EDS are currently in talks regarding existing and new account opportunities.

• Microsoft??… On January 22, 2001, Microsoft announced that it will be launching a line of Microsoft.NET servers. Microsoft is not a server manufacturer but it is a partner of Steelcloud. SteelCloud manufactures turnkey server appliances. These products are “created in collaboration with some of the world's largest and leading software manufacturers”. The appliances are sold, on an OEM basis to software manufacturers who resell them through their worldwide distribution channels under their own brand name. Could it be that Microsoft is going to use SteelCloud servers under the Microsoft brand? On Jan. 2, 2001, SteelCloud announced it “has received a $1,500,000 order from a major network software manufacturer for ready-to- deploy-and-use server appliances. SteelCloud will pre-load each appliance with the network software manufacturer's product so that when an end user receives the appliance, it will be operational right out of the box.”

·         EGreenCoffee.com… Thomas P. Dunne sits on the board of advisors to eGreenCoffee. http://www.egreencoffee.com/Public/Sundry/boardbios.asp The company is the first to offer buyers and sellers a liquid, anonymous and secure platform to trade green coffee globally via the Internet. Designed by coffee professionals, the B2B eMarketplace is bringing the $50 billion industry into the Internet economy with an easily accessible, common and reliable system that replicates the current trading process while greatly improving its efficiency. eGreenCoffee.com is also a single source for industry information, including futures quotes, weather updates, market alerts and news, etc. After successfully establishing the green coffee exchange, eGreenCoffee will replicate the model and work with strategic partners to develop similar sites for the $150 billion soft commodity market that includes cocoa, tea, sugar, rice, corn, wheat, citrus and cotton. In addition to Dunne, Lawrence T. Babbio, Jr., Vice Chairman and President of Verizon Communications also sits on the board. Anyone want to speculate here about where SteelCloud server appliances may enter the picture??

Shares of SCLD closed Friday at $1.06 on volume of 42,000 shares. At these levels Stockprowler views SCLD as a low to moderate risk speculation with very high upside potential. Readers should do their own due diligence before investing in this or any other stock.

Good trading… Stockprowler