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||Time To Limbo-
How Low Will You Go?
weekend's edition on the Sneak Peak at July, I alluded to sharing a
few penny stock ideas throughout the remainder of the month. I believe
the larger caps are overextended. The risk/reward ratios at current entry
levels are too high right now. However, I also believe there is some easy
money to be made over the next several months as a number of penny stocks
simply rise with the tide and regain reasonable levels. Witness AMNM
up from $.07 to $.14 since June 6- nearly a net double in five weeks.
Also, in last weekend's edition I
mentioned that I had uncovered a stock trading at $.015 (yes- that's a
penny and a half), and the company was now achieving about $200,000 per
quarter in positive cash flow. I received about 200 emails asking for more
information. At your request- here is the idea. A turnaround situation
that Darwin would be proud of. A company which should have gone bankrupt,
avoided extinction, and mutated into an entirely newly evolved species.
There is baggage, but it seems to be manageable. Even if the stock only
goes to $.10 (one dime), the percentage return on investment is outstanding.
Moreover, you can play fund manager
with this stock. Ever wonder what it would be like to buy one million shares
of stock in the open market?- here's your chance. This idea is risky- just
by virtue of the price you can make that assumption.
For your consideration:
Alert- Imaging Technologies (OTC BB: IMTO)
Imaging Technologies used to sell
digital imaging solutions. It was one of the high flyers in the last bull
market. The company's fortunes took a turn for the worse when they shipped
a $4 million order to a Japanese company that filed for bankruptcy shortly
after taking receipt of the merchandise. IMTO took the loss on the order
and subsequently defaulted on some bank loans.
High flying IMTO immediately began
spiraling towards the ground. Chairman Brian Bonar got control of the stick
just prior to impact by creating an entirely new business. The plane is
now climbing out slowly. Inside of one year this company could regain high
altitude and just flip on the autopilot and cruise. According to Mr. Bonar,
this turn around is being fueled by positive cash flow from the new business.
I'm writing about it now because I'd rather give you the facts and let
you make up your own mind while the stock is still trading under 2 cents.
is Now A PEO
Do you know what a PEO is? The market
for PEO's was $5 billion in 1992. By 2000 it had grown to $26 billion.
If you are a PEO you provide an outsourced
service for small companies. PEO stands for Profession Employee Organization.
Rather than have the extreme cost of a human resources department and all
the effort and expenses associated with payroll, workmen's comp, insurance
benefits, and pension plans, you can simply pay your labor expenses in
one payment to a PEO. They take if from there.
35 million Americans work for companies
with less than 100 employees. That is the size of the potential market.
Once you retain a PEO to replace
your Human Resources Department, your employees formally become employees
of the PEO. They just show up for work at your place of business.
Through the power of numbers the
PEO has the ability to negotiate better pricing on many employee related
costs like health insurance, pension plans and 401K's, workmen's comp,
The business model is beautiful,
which attracted me to the idea. PEO's have very high and consistent cash
flow, which allows for simplistic evaluation.
IMTO made a few mistakes in the early
going, but the business has stabilized, and according to Chairman Brian
Bonar performs as follows:
IMTO generates nearly all its revenues
from the PEO business.
Currently, there are about 4,500 employees
managed by IMTO.
Each employee creates cash flow of about
$70 per day- this equates to $315,000 in daily revenue flow.
IMTO makes about 8% gross margins on
daily revenue- hence $25,000 in gross profits per day.
At 20 working days per month- this equates
to $500,000 in gross profits per month.
Hard costs to run the company are about
$350,000 per month.
Therefore, the company is now generating
$150,000 in positive cash flow per month, or $1.8 million annually.
Not bad for a stock trading at $.015.
In a phrase- $12 million in
debt- nearly all of it in default. Much of it with judgments against
the company. They should have gone bankrupt several years ago.
However, the senior lender holds
a $3 million note. No one can collect until the senior lender gets paid,
and IMTO has negotiated an indefinite, interest free extension.
Most of the debt is nearing the statute
of limitations. If not collected it becomes uncollectable, and the company
skates. Chairman Bonar believes he can eradicate the entire amount of debt
over the course of the next year through low ball settlement offers and
expiring statutes. He now has the platform to achieve this goal.
Today, just after the market closed,
announced the acquisition of all the managed employees of Joint Employers
Group. The acquisition adds 1700 more employees under management, bringing
the total to about 6,200.
This means the company will now have
about $435,000 in daily cash flow, $35,800 in gross profits, and about
$200,000 in monthly free cash flow. This equates to $2.4 million
in annual positive cash flow.
From here forward the company will
only be reporting the gross profit as revenue, not the amount of money
it collects from the company for its employees. This will bring revenues
down considerably, but bring gross margins up substantially. You end up
with a low revenue/high profit margin company as opposed to high revenues/low
profits. In either case, the positive cash flow remains the same.
A look at trailing financials does
not reveal this performance. A good deal of new business was added near
the end of March, and some unprofitable businesses were ejected.
All of the figures were provided
to me by Brian Bonar, Chairman of the company. I have actually trimmed
his estimates considerably. You wouldn't believe the actual numbers if
I told you.
The June quarterly performance will
not be reported for some time as it is the company's fiscal year end, but
they will show a dramatic turnaround.
There is an advantage to writing
a newsletter as opposed to being an analyst. I don't have to wait for the
audited numbers. I can give you this information while the stock is still
under $.02. There are 180 million shares issued and outstanding at this
time. Therefore, the entire market value of the company is only $3.8 million.
From these levels, I think there could be a triple in the stock.
So, for you risk minded readers who
want a lot of bang for the buck, here are my thoughts:
I included a chart. It only tells us
there is support for the stock at about $.01 and overhead resistance at
$.025. Not much you can do with a chart on this one.
Buy up to $.03 (yes, that's 3 cents)
Stop Loss: $.015
Price Target: Short Term (60 days)-
$.05. This is just a stab at a number- there is no telling where this one
The company has been extremely quiet
about its progress. We are the first source to feature the turnaround situation.
This gives you a competitive advantage over other potential market participants.
Here is the complete text of today's
news release for your review:
|Press Release Source:
Imaging Technologies Corporation
Acquires New PEO Clients in California
Thursday July 10, 5:53
Additional 1,700 Worksite
Employees Added to Existing Business
SAN DIEGO, July 10 /PRNewswire-FirstCall/
-- Imaging Technologies Corporation (OTC Bulletin Board: IMTO - News) announced
today that has entered into an agreement with Joint Employers Group (JEG)
that will transfer approximately 1,700 worksite employees to ITEC's PEO
The agreement calls for
ITEC's SourceOne Group subsidiary to absorb these new worksite employees,
which could provide approximately $1.7 million in gross monthly billings
in the first quarter of ITEC's 2004 fiscal year, beginning July 1, 2003.
"We are pleased to enter
into this agreement with JEG as it expands our presence in the California
marketplace," said Brian Bonar, ITEC Chairman and CEO. "This new business
will serve to strengthen our PEO business in California, which has been
a difficult market for PEO companies due to high workers' compensation
costs," he added.
Ray Hotchkiss, president
of JEG, will join ITEC to assist in the transition of clients from JEG
to SourceOne Group.
ITEC's SourceOne Group
provides small to medium-sized businesses a broad range of services associated
with human resources management. These include benefits and payroll administration,
health and workers' compensation insurance programs, personnel records
management, employer liability management, employee recruiting and selection,
performance management, and training and development services.
Details regarding ITEC's
PEO businesses and the services they provide can be obtained at ITEC's
web site http://www.itec.net/. Visitors to ITEC on the web can navigate
to several areas of interest, including: products and services, archived
press releases, and investor information.
About Imaging Technologies
Corporation was founded in 1982. Headquartered in San Diego, California,
the Company produces and distributes imaging products; and provides a variety
of professional services related to human resources to businesses.
A number of ITEC's subsidiaries,
including SourceOne Group and ProSportsHR, are professional employer organizations
that provide a variety of personnel and human resources services to small
to medium-sized businesses.
ITEC's imaging products
include its proprietary suite of software applications -- ColorBlind®
-- which is devoted to color management for desktop and commercial printing
and graphic arts.
ITEC's e-commerce initiatives,
www.dealseekers.com and www.color.com, provide sales and service support
for consumables such as inks, toner, and paper, and for color education
and software products.
The Company owns controlling
interested in Quik Pix, Inc. (Pink Sheets: QPIX - News), a leading visual
marketing support firm located in Buena Park, California. The company's
patented PhotoMotion(TM) is a unique color medium of multi-image transparencies.
The process uses existing originals to create the illusion of movement,
and allows for three to five distinct images to be displayed with an existing
The Company owns a controlling
interest in Greenland Corporation. Greenland's ExpertHR subsidiary provides
professional employer services (PEO) to niche markets. Greenland's Check
Central subsidiary is an information technology company that has developed
the Check Central Solutions' transaction processing system software and
related MAXcash(TM) Automated Banking Machine(TM) (ABM(TM) kiosk designed
to provide self-service check cashing and ATM-banking functionality. Greenland's
common stock trades on the OTC Bulletin Board under the symbol GRLC. Information
on the Company is available at the ITEC Web site at http://www.greenlandcorp.com/.
Information on the Company
is available at the ITEC Web site at www.itec.net.
Statements in this press
release may constitute forward-looking statements and are subject to numerous
risks and uncertainties, including the failure to complete successfully
the development of new or enhanced products, the Company's future capital
needs, the lack of market demand for any new or enhanced products the Company
may develop, any actions by the Company's partners that may be adverse
to the Company, the success of competitive products, other economic factors
affecting the Company and its markets, seasonal changes, and other risks
detailed from time to time in the Company's filings with the U.S. Securities
and Exchange Commission. The actual results may differ materially from
those contained in this press release. The Company disclaims any obligation
to update any statements in this press release.
Brian Bonar, Chief Executive Officer
Imaging Technologies Corporation
17075 Via Del Campo - San Diego, CA 92127
858-451-6120 - e-mail email@example.com
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