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OTC Journal Members:
This edition contains our year end
updates and thoughts on the remaining companies we have featured. These
include MedGrup (OTC BB: CODX), PhotoChannel Networks (OTC BB:
PHCHF), IQrom (OTC BB: IQCOM), and PawnBroker (OTC BB: PBRR).
Next week's first edition of 2001
will include a look back at 2000, a look forward at 2001, and our thoughts
on the trouble with Wall Street Analysts.
Corporation (OTC BB: CODX)
MedGrup is our #1 pick for
a rebound in early 2001. The company has been profitable for the past three
years, and has doubled in sales and earnings every year since inception.
More importantly, MedGrup is the only company we cover which is
in the red-hot health care industry. While technology stocks have been
getting slaughtered, pharmaceuticals companies and HMO's have been making
new all time highs.
We spoke with MedGrup President
Terry Holmes about prospects for 2001. He was confident the company could
once again double in sales and earnings as they have done the past three
MedGrup provides outsourced
coding for hospital charts. Hospitals use their services to mitigate potential
liabilities associated with upcoding and fraud in health care billing.
Hospitals save money and enhance revenues when using their service, which
is why they have doubled in size every year for the past three years, and
will probably do so again in 2001.
Their new Code@Hometm
service is due to be launched in early January,
and all new customers will receive this new, efficient technology. The
stock is down to $1 from an October high of $4.875, and we expect a rebound
to at least the $3 level.
Networks (OTC BB: PHCHF; MSE: PNI)
PhotoChannel's pending merger
with Moto Photo is the company's primary goal in early 2001. This
merger will give the company a substantial customer base, a national infrastructure,
and significant sales.
Their Investment Banking relationship
with Salomon Smith Barney should prove valuable once the merger is completed.
Here is a list of the company's year 2000 accomplishments:
Look for this stock to trade well as
the digital photography market continues to grow. One minor negative- once
the Moto Photo merger is completed the company will qualify for a NASDAQ
listing in every category except the $4 price. The company may conclude
a reverse split is necessary to obtain the $4 stock price for a NASDAQ
Completed $15 million financing in
On September 19th they announced retaining
Salomon Smith Barney as their Strategic Advisor.
On September 20th they announced an
agreement to acquire Moto Photo, the third largest specialty retailer
on imaging services in North America. Completion is expected in the 1st
Quarter of 2001. The company will then have physical locations all over
the US with 2 million customers developing 9 million rolls of film annually.
During fiscal 1999, Moto Photo reported revenues of US $36.8 million
and a net income of US $1.65 million.
On October 2nd the company officially
opened it web site for business.
PhotoChannel officially launched it
service in early October. In mid October the company implemented an Internet
Marketing campaign. They have already garnered over 60,000 registered
users in just six weeks, and were experiencing as many as 4500 sign
ups per day just prior to Thanksgiving.
Communications (OTC BB: IQCO)
IQrom has been a disappointment
in terms of major contract signings. The market for their product has not
developed as rapidly as originally hoped partially due to the ramp down
of dot-com related promotional spending.
In a recent meeting with management
we learned that the company has a substantial flow of new smaller contracts.
Cash flow is adequate to meet the company's immediate needs. There are
potential major milestones on the horizon, and we are hoping for breaking
news soon. Time will tell if they come to fruition.
IQrom designs and markets
credit card sized CD Roms which have a unique and proprietary updateable
feature. The card has the ability to update its content directly from the
Internet when in the CD Rom drive of a computer.
Expectations were very high for this
company back in the summer, but lead times on new contracts have proven
longer than anticipated. This one could be getting ready to turn the corner
to the positive side after several months of disappointments.
The stock is probably oversold and
due for a bounce. At current prices is seems as if complete failure is
priced into the shares, and we don't believe that will be the case.
(OTC BB: PBRR)
PawnBroker has been the wildest
ride of all with a tragic ending. We started the year at $5 per share,
and since then we have seen $17 and $.17, with the year ending at the bottom.
We always liked their business model.
eBay has proven the public has an appetite for previously owned
merchandise at bargain prices. They provide a mechanism for Pawbrokers
to sell their goods over the Internet, and we believe the business model
could have succeeded. It is estimated there are 200 million items of value
which could be for sale in Pawnshops nationwide.
However, the high number of dot-com
business failures made it impossible for the company to finance a high
profile roll out of its B-to-C ecommerce site. They are more focused on
their B-to-B business where they are creating a common Internet infrastructure
for Pawnbrokers to use.
Their last financial statement led
us to believe they have enough capital to last one or two more quarters.
After then they will need additional money or significant sales.
One positive- the stock is
already trading as if the company were out of business, so there's really
nothing to lose. One negative- if the company survives it will probably
have to reverse split its stock, which is generally viewed as a negative.
We were unable to reach management
for a comment.
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