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Small Article on the Small But Growing IMGG

|Includes: GE, PennantPark Investment (PNNT)

I just published this article accidentally as a comment under Seeking Alpha's penny stock article.  Still new investors might want to read the Seeking Alpha article before reading mine. 

seekingalpha.com/article/108879-reconsid...

To sum it up, the writer (Mick Weinstein) makes a great point:  because penny stocks are extremely volatile and more subject to manipulation one must exercise more caution trading them.  Disclaimer:  While I hold IMGG today I might not tomorrow.  If you review my past articles, you will see that I trade in all kinds of stocks at all times, including shorts, and including risky ones with little coverage such as PNNT.  Do your own due dilligence.

Here is my article:

This is a small note about a small company that could get big. About 3 years ago I researched and invested in IMGG. It is only traded on the OTC market. I thought I knew one of the people whose names was associated with the company - but since penny stocks can be easily manipulated, I visited the company - unannounced. Those present would not let me see their device up close (they frankly told me that they were worried I might be a spy from a competitor or then buyout company GE!). Since that time GE (another current holding of mine) has gone down to less than half what it was and this company has gone down and now might go up to almost twice what it was.

"What do you mean, gone down?" you might ask. As I recall, for several months that I began to take nibbles, this stock was at trading at approximately .13-.20/share. It was coming down from around .35/share. As I recall, it had hit around .35/share in 2006 after CEO Janes had made a presentation of his product to small cap investors in NYC. He also had gotten a nice write up in a magazine as a stock to watch. As you can imagine, CEO Dean Janes told me that since that event he was upset that the share price had continued to go down -- even though he was doing everything he reasonably could and should be doing to advance his company and product.

Since I had approached him as an investor, he asked me how I could explain why several "hot" companies were trading at $1 or more per share and they did not even have a physical warehouse or headquarters - which I could see that IMGG had. I agreed that it did not make sense that the share price of IMGG was going down from .35/share and not up.

CEO Dean Janes and I did disagree on two things though: in 2006, he sincerely believed that his company would likely be getting FDA approval by the end of 2007. Then he believed investors would flock to his company and GE, Siemens, or some other Buyoutco would probably make him seem crazy not to sell his device. He was thinking that even if IMGG sold the device, IMGG might still have a huge profitable operation going by continuing to develop, upgrade, and repair it.

I told him that I did not believe 2007 would be his year. I thought it would take until at least 2008. I must admit, when 2008 came and the entire stock market seemed upside down, I realized that IMGG might not have the great year that I thought it would in 2008.

However, IMGG is a company that has weathered a severe fire and other set-backs. So when a family member (whom I had advised to buy IMGG in 2006) asked whether he should sell, I said hell NO! I pointed out that to IMGG this storm was business as usual. To GE, this storm was far more life threatening.

Now IMGG's stock has "rushed" up to .24/share. According to yahoo (as of 091509) IMGG has a $63.73M market cap. However, I have seen their warehouse. It is a relatively NEW building. When I visited, it had a LOT of empty space (even though they were using some space for C-arm re-manufacturing).

My argument with CEO Janes was that they should manufacture the Dominion device themselves. At that time he did not like that idea as much because GE could bring a lot of cash to the manufacturing operation that IMGG did not have. - But that was 3 years ago. Now it is not clear to me whether GE, Siemens or any of the potential suitors Janes thought might arrive are in any position to be buying anything.

Furthermore, the Dominion device is not that big. It did not, for example take up much space inside their facility. Plus, for each one of these devices they are able to make and sell, it is my understanding that they would generate approximately $500k in revenue. I do not know how much of that would be profit, but I would imagine that with each device produced, they could make it cheaper and cheaper.

I could be wrong, (I have not had time to keep on on the latest press releases and would look forward to hearing from someone who has) but it seems like the company might now be leaning towards manufacturing Dominions themselves. This is because if they have "luminary sites," then they can force potential buyers to go visit the device, see it in operation, and either special order it, or NOT. This almost eliminates the need for a big marketing team. Instead, IMGG should have someone who simply books orders for the device. Better too many orders than too few orders and lots of extra devices sitting around unsold.

Again, I would argue that although Janes himself may be tired and in need of cash and/or retirement (after all he has dedicated a significant part of his life to the Dominion), but IMGG does not need a buyout as much as it needs buyers. When I say buyers, I do not mean buyers at .35 or even $1/share. I mean buyers of the device. Also, buyers of the software to run it and upgrade it. Also, buyers of the service technicians and parts to fix it.

In the meantime, because this company has a new product which offers better and cheaper images than regular X-ray machines, a driven CEO/founder, no direct competitors, and has the ability to manufacture its own product, software and related components, I think that even .35/share it would be undervalued - especially if the FDA approves its product. So, if you are holding it, I would say be patient. Short term traders may be wise to exit at .35/share. So perhaps there will be a dip for awhile after it hits that. But longer term this could be $1/share stock, and longer term this could be worth far more.

Long IMGG but may sell some shares depending on unknown factors including but not limited to FDA approval or disapproval.