►Analyse: kurzfristig 100% Kurspotenzial mit C-Chip! Rakete soeben gestartet! - 500 Beiträge pro Seite

[Vershofen]

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THE RESEARCH WORKS, INC.

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Equity Research Services for Small-Cap and Microcap Stocks

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C-Chip Technologies Corporation




Symbol/exchange: CCHI/OTC BB
Average daily volume: 439,000

Stock price 5/24/04: $0.98
Common shares (3/31): 36,028,385

52-week price range: $1.08 - $0.15
Equity market capitalization: $35 million




Recent News
Stock Price Chart
SEC Filings




An Emerging Telemetry Company Providing

Asset Security and Remote Asset Management Solutions


C-Chip Technologies Corporation ("C-Chip" or the "Company") is a Canadian-based developer and marketer of wireless, web-based communication tools that offer business users remote access, control and monitoring of a wide range of assets. These devices are used to secure and control access to vehicles, office equipment and industrial machinery. The Company recently started selling its first product, "Credit Manager", a benefit denial receiver that can be incorporated into any vehicle by a car dealership or leasing company to deter consumers from withholding leasing payments. C-Chip’s tracking product, the "Shadow", is being launched this quarter, and other security products, including the "HAWK" RFID kill-switch, should follow shortly.




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The telemetry market worldwide is expected to reach $12 billion per annum within three years, with a growth rate of 66% per annum. Although high-end telemetry systems are popular in the automotive industry, it’s likely the technology will rapidly move down market. Through its low-cost solutions, C-Chip is in position to benefit from this trend.


•
C-Chip is expanding its product line to include tracking capabilities and anti-theft devices. The diversification of C-Chip’s product line should enable the Company to attract customers looking for a bundled solution. Additionally, the Company should expand the ability to remotely manage assets beyond vehicles to consumer devices, including computers, high-end televisions and refrigerators.


•
The recent acquisition of Canadian Security Agency helps position C-Chip as a full-service asset monitoring and security company. C-Chip will soon be able to offer customers an end-to-end solution that includes hardware, software and services for turnkey operation.


•
Subsequent to securing necessary funds, C-Chip is focused on its sales and marketing efforts. C-Chip recently completed a financing that may yield up to $8 million to help initiate the Company’s sales and marketing efforts. While historical sales have been negligible, revenue of approximately $9 million in FY 2005 (ending June 30th) appear to be achievable. Additionally, the Company has been able to develop crucial sales channels and partnerships to gain sales visibility.


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Although a high-risk investment, C-Chip’s stock appears to be significantly undervalued. Based on a number of assumptions outlined in this report, we have set a target price for the stock of $1.90.

_____________________________________________________________________________________


Address: 4710 St. Ambroise, Suite 227 Montreal, Quebec H4C 2C7 Canada

Telephone: [phone]

Web site: www.c-chip.com

State or other jurisdiction of incorporation or organization: Nevada

Auditors: Manning Elliott (Vancouver, Canada). In their review of the Company’s fiscal 2003 results, the auditors expressed a "going-concern" qualification.

Investor contact: Stephane Solis, President [phone]


Industry Background


The recent Internet evolution was spawned largely by the adoption of computers by the mass market. Once most individuals acquired PCs, it was only a matter of time before people began communicating with each other through these devices. The next likely development in the technology progression is the Machine-to-Machine (M2M) evolution. People will no longer have to start the communications process. Rather, machines will "talk" to other machines and to humans when a pre-set programmed trigger is activated.


Similar to the Internet, M2M is being mislabeled as an "industry." The Internet in reality is a "medium" that enables individuals to correspond, interact, carry out commerce, entertain and educate. Consequently, nearly all industries have been able to benefit (and in many cases become more efficient) through the Internet. M2M will also incorporate nearly all industries and forms of communication. In fact, benefits in efficiency and responsiveness have the potential to dwarf those of the Internet.


M2M, also commonly known as telemetry, is a communications process that enables the transmission of asset or environmental data to provide status information on a remote process, function or device. It can be used for everything from copy-machines to high-end medical equipment. To provide this "talking" capability, M2M employs sensors, processors, and, in some cases, radio frequency identification (RFID) tags. While most applications operate over wireless networks (wi-fi, cellular, paging), M2M can employ traditional wired networks as well.


The Telemetry market is still in its infancy. The most prominent sub-sector of the M2M market is automotive "Telematics," the application of location-based telemetry in vehicles. These systems can provide vehicle tracking and positioning, on-line navigation, remote engine diagnostics and emergency assistance. For example, many GM cars are equipped with the popular OnStar telematics system. Along with its concierge services and stolen vehicle tracking, it automatically calls for help when there is an emergency (if airbags are deployed). According to a recently published report from Telematics Research Group Inc. (TRG), there are currently 25 brands of vehicles with more than 100 models that offer telematics equipment in the United States. Still, this only represents 12% of vehicles sold domestically. TRG estimates that it can grow to 60% of vehicles sold by 2010.


The industry is poised for rapid growth. In fact, research group Instat/MDR projects revenue from telematics hardware, subscriptions and Web-based services to rise to almost $12 billion by 2006, with a compound annual growth rate of 66%. Still, while automotive M2M is poised to be the industry catalyst, M2M should quickly grow beyond the car. In fact, consumer electronics, office equipment and industrial machinery will likely become the largest revenue generating sub-sectors of the M2M marketplace.


C-Chip`s Business Model


C-Chip is positioning itself as a full-service asset monitoring and securing company. The Company is shifting its focus from its research and development efforts to sales and marketing activities as its products are ready for large-scale production. While C-Chip’s initial sales focus is in the market for automobile and alternative vehicle telemetry, the Company could rapidly expand its products and services (based on the identical technologies) for securing any type of asset including consumer products and electronics. C-Chip intends to acquire additional security services companies to quickly augment its monitoring capabilities. Additionally, C-Chip may eventually acquire a distribution channel within the U.S.


Currently, management is selling telemetry and security solutions to three key market verticals: insurance companies, car dealerships, and fleet management companies. As of January, major insurance companies including Allstate offer a discount for those customers carrying the Hawk (RFID) and Shadow (locater). A few companies are even specifically recommending C-Chips products. For competitive purposes, many other insurance companies are expected to follow shortly.


On a geographic basis, the Company is focused on the North American markets (specifically the U.S.) due to its proximity and responsive market. However, the Company is poised to grow internationally through potential strategic partner relationships in Asia and Europe. In fact, C-Chip recently established a relationship with 7bridge Capital Partners Limited, a privately held Hong Kong company, to develop products and services in China.


C-Chip has properly hedged its risk by limiting its financial exposure (limited fixed costs) and by keeping its overall cost structure low. The Company employs a small staff of 27 full-time employees and consultants. These development and sales focused individuals are a low-paid, lean group (less than $100,000 in aggregate salaries per month) that will only be expanded as warranted by sales. Additionally, C-Chip does not manufacture any of the solutions, but outsources this activity to a local ISO 9002-certificed manufacturer. The Company carries minimal inventory, but lead-time for delivery is a maximum of six weeks. It does not incur any major production expense and has revenue share and commission-based agreements in place for many of its distribution channels. Therefore, many of its costs are variable, but the business is scalable without any additional significant capital outlay.


C-Chip`s Product Offerings


C-Chip currently offers three distinct products, but is marketing device combinations as well. These products include remote vehicle deactivators, location trackers and passive kill-switches. Additionally, C-Chip has completed development of potential add-on products utilizing current technologies such as the MPP, a remote deactivator for the consumer products market.


Credit Manager. C-Chip’s initial product is a remote deactivator for automobiles. The device is intended for the low-end car leasing market. According to industry sources, the market size is more than three million cars per year. If a consumer withholds his/her monthly lease payment, a car dealership can elect to deactivate the car or activate a buzzer as a reminder. The device can easily be installed in vehicles by a technician and it would be transparent to the lessee if payments were continuously made on time. To reactivate the car, the leasing company uses a web-enabled system that communicates directly with the vehicle via a paging network. This is less cumbersome than alternative devices that require the lessee to enter a code.


The Company sells this product through a network of distributors in the U.S. in addition to its OEM agreement with Pay Technologies. Wholesale pricing for the Credit Manager starts at $75 per unit. Additionally, there is a yearly renewal cost for each unit of $25 per year. Retail pricing is more difficult to calculate since there is a disparity in pricing ranging from $100 (distributors) to $180 (retail) per unit. The only foreseeable limitation of the device is the paging network’s coverage zone. However, more than 95% of the U.S. population live and travel within the coverage area.


MPP. Based on the identical technology, C-Chip is expected to launch a complementary product to the Credit Manager for the consumer products marketplace. Moveable Property Protector (MPP) is positioned for the "rent to own" industry. Consumers with limited funds that want to buy high-end electronics or appliances will be sold appliances or electronics with an embedded chip. If the consumer fails to pay the monthly payment, a buzzer will be sounded. After a set time, the device will be deactivated. A limitation is that currently the device must be wired on 110-volt current.


There are currently an estimated 30 sizeable companies in the U.S. in the "rent to own" industry and a direct sales approach to selling could work in this market. Although C-Chip has not yet begun the sales process, a retail price of $100 per device is feasible with a low annual service fee. A secondary product with two-way communication, "MP2", is envisioned as a subsequent product in the consumer market. The MP2 will enable companies to identify if the appliance or electronic device is physically moved. This product may retail for under $200.


Shadow. The "Shadow" is a tracking location device that enables fleet managers and insurance companies to detect the location, speed and direction of a vehicle. The device includes two-way communication with global positioning satellite (GPS) technology. Users of the device can track vehicles through the Internet, as the Company has been working on developing a proprietary web-based interface. Additionally, since paging networks are significantly cheaper than cellular (on a per transaction basis), it is an ideal network for tracking capabilities. Lastly, unlike cellular technology, which is only capable of narrowing a location to a general area through triangulation, C-Chip’s technology enables customers to pinpoint an exact location of the vehicle within 10 feet.


The Company is selling its tracking device through distributors and directly to insurance companies and fleets. However, the Company is in talks regarding potential OEM agreements with large companies. The "Shadow" is priced at $150-200 wholesale and will retail for slightly higher. Additionally, there is an annual service fee of approximately $60 for each vehicle equipped with the device.


Hawk / Falcon. For consumers of cars and sports vehicles, the Company is marketing a passive deactivator, or "kill switch." The automobile version of this device is being branded "Falcon" and the motorcycle device is "Hawk." The disabling device can be attached to the vehicle’s starter, fuel pump or transmission. The user of the vehicle holds a transponder that sends an RFID (radio frequency identification) signal to the car that allows for the completion of the circuit, thereby activating the vehicle. A limitation with this device is that it is currently only weatherproof, not waterproof. Therefore, it cannot yet be placed on water vehicles.


C-Chip intends to sell its RFID products primarily as add-on functionality to its Credit Manager (branded Credit Manager Plus) and Shadow products. However, consumers can elect to purchase the RFID device as a stand-alone solution. It is feasible that the Hawk will sell at a wholesale price of approximately $85 retailing for an estimated $150, significantly below competitors` pricing.


Security Services & Future Solutions. Through its recent acquisition of CSA, C-Chip has expanded into security services and monitoring. While revenue in this division is only $2-3 million annually, management will likely focus on future potential acquisitions in the service industry. The Company charges approximately $15-25 hourly for basic guard services, $70 per hour for surveillance, and $150-200 for investigation services. The Company is positioning itself to become a turnkey outsourced solution for corporations who want to monitor and secure assets in the field.


Intellectual Property & Regulatory Issues


C-Chip has several patents pending, including two technical patents and one process patent. In fact, the Company’s products are all built upon a patent-pending technology that revolves around an embedded sensor on a target device. This sensor is attached to a radio frequency receiver that can accept remote commands. Additionally, the device has a processor with a unique electronic serial number that corresponds to the sensor so users can recognize the owner of the device. This processor accepts an input signal and compares it to decide if the current operating condition should be maintained.


The Company allows users to monitor vehicles equipped with the C-Chip and GPS technology using a Web interface. While the web-based user applications and secure database management center that C-Chip employs are proprietary, management will not likely apply for any patents on these processes. Still, it is a significant competitive advantage that C-Chip is able to process user commands through the public Internet and does not need a proprietary network.


As opposed to cellular based competitors, C-Chip utilizes a "reflex" network, or pager system, for its wireless tools. The Company is currently using PageNet’s network in Canada and MetroCall’s network in the U.S. When paging networks are not available, the Company can rely on more expensive wireless cellular networks for specific location data.


The Company’s research and development department is lean, with two engineers and one tech support individual. This division should be expanded as warranted by sales. C-Chip currently tests the products internally, but random testing is performed in the field as well. As the Company grows, it may need to outsource testing as well to a third-party facility.


Sales & Marketing


C-Chip is initiating its sales and marketing efforts with a three-pronged approach including direct sales, channel distribution and OEM sales. To enhance the sales and marketing team, the Company recently hired a Vice President of Sales and is adding four to five sales and marketing employees, a significant increase from two full-time employees and two consultants. At least two of these new individuals should be senior-level staff. C-Chip’s overall sales strategy is straightforward. The Company offers efficient, inexpensive and simple to use solutions. These products allow customers to improve productivity and responsiveness while expanding their respective potential customer base.


The Company currently sells its Credit Manager both directly and through distributors primarily to leasing companies, financial institutions and banks. In fact, C-Chip recently initiated a distribution agreement with Northland Auto Enterprises to sell its credit management solution. While there are three significant competitors in this marketplace, one of the competitors also sell C-Chip’s product albeit as a high-end premium priced product. In the MPP product line, C-Chip will not likely use any distribution network since there are a limited number of sizeable customers. Rather, the Company is attempting to sell directly to these companies.


C-Chip is using product branding in markets where there are several competitors. In the location-tracking sector, the Company is branding its products with the "Shadow" label. The "Shadow" tracking manager can be bundled with C-Chip’s other solutions. The "S-100C" is a combination of the Shadow and Credit Manager, "S-100H" is the Shadow and HAWK kill-switch solution, "S-100M" is the Shadow and an active alarm system, and "S-Xtra" is the Shadow, Hawk and Credit Manager. In addition to its own branding, the Company is aggressively pursuing co-marketing and OEM agreements with wireless carriers.


In the Security market, C-Chip is working with Insurance companies to create financial incentives for customers to purchase security solutions. Theft remains a large cost for insurance companies and indirectly to consumers (due to higher premiums). Car dealerships are also a robust market since margins in automotive sales have declined dramatically. In fact, sales people receive a significant portion of their income through selling options, including theft deterrent systems.


Competition


Although there are many companies in the asset monitoring and security sector, C-Chip has a competitive advantage due to its comprehensive product portfolio, low price, ease of installation and use, and physical compactness of the device. There are significantly high barriers to entry regarding the firmware and interface technologies within the Credit Manager and Shadow product lines. However, the GPS and RFID hardware can become commodities. Still, the Company is well positioned to carve a niche for itself in the emerging M2M and telematics industries.


Credit Manager. Within the Credit Manager Product line, there are three major competitors. These include Pay Technologies LLC (private), Payment Protection Systems (private, developer of "On Time") and PassTime (private). "On Time," developed in 1999, is the most significant competing product. It employs an electronic starter interrupt with a visible keypad reminder. The LED turns red and counts down three days when payment is due. If payment is not made within the period allotted, the vehicle is disabled. When the customer pays the finance company, he/she must enter a code into the keypad. This is the case whether or not payment is received on time. According to a September 2003 "Inc. Magazine" article, the company has sold more than 100,000 "On Time" devices. PassTime, in comparison, had only 65,000 units on the road as of June 2003. The third competitor, Pay Technologies, sells a proprietary device "PayTeck" as well as C-Chip’s device under their "WebTeck" brand name.


MPP. In the nascent consumer device "rent to own" market, there are no significant competitors. Management views this as a disadvantage since it must initiate an educational campaign to stimulate sales. However, there is a significant first-mover advantage opportunity as companies should quickly recognize the opportunity and adopt C-Chip’s MPP product within the next few years.


Tracking. The vehicle tracking industry is a fragmented sub-sector. While OnStar (division of GM) and ATX (private) have gained popularity, they are focused on providing consumer services, including driving directions and remotely unlocking doors. Additionally, they are viewed as customer relationship management services, not revenue generating or cost-cutting technologies. C-Chip, on the other hand, is selling its products and services to companies and fleet managers that require tracking technology to monitor employees for profitability and efficiency purposes.


There are many other companies that provide tracking systems, but these are generally more expensive systems positioned towards a different market segment. LoJack (LOJN/ OTC) and Boomerang Tracking (BMG/TSX) are focused exclusively on vehicle recovery and do not let customers obtain access the tracking information. Their products employ VHF radio and cellular triangulation respectively, not GPS technology. Additionally, Boomerang charges $430 for four years of service, more expensive than C-Chip’s Shadow on the same basis. Other indirect competitors who offer some, but not all of C-Chip’s capabilities include @Road (ARDI/OTC), Aircept (private), AirIQ (IQ/TSX), Earthtrak (private), Intertrak (private) and Vigiltec (private).


RFID. There are a plethora of anti-theft deterrent devices available to the consumer. However, most are active alarm systems that create more noise than protection. Additionally, the newly available passive alarm systems are expensive, bulky or easy to override. While there is not a foreseeable robust market for stand-alone RFID devices in automobiles, there should be significant demand for C-Chip’s product as part of a packaged solution. The Company’s sports vehicle RFID product should be uniquely positioned in the market and, therefore, attract consumers even as a standalone product.


Company History

C-Chip was established in April 2000 as a technology research company specifically focused on the development a wireless, web-based set of communication tools that offer users complete access, remote control and monitoring of a variety of equipment. The Company entered the public markets in January 2003 through an asset purchase by Keystone Mines Limited, a mining company with four mineral claims located in British Columbia, Canada. Keystone was in the business of acquiring, exploring and developing mineral properties. The Company changed its name to C-Chip Technologies Corporation and its OTC Bulletin Board stock symbol (CCHI) in February 2003.


Since the Company’s inception, C-Chip has completed development, designed prototypes and commenced the production and commercialization of its initial product offerings. These products are based on the acquired technology which allows selective enabling, disabling (on/off) of targeted equipment, and other commands, at will, from anywhere to almost anywhere in North America. In February 2004, the Company completed its acquisition of Canadian Security Agency, Inc.; a private Montreal-based security services company, and established a new subsidiary. Additionally, it established an alliance with 7bridge Capital Partners Limited, a privately held Hong Kong company, to develop C-Chip products and services in Asia. In April 2004, C-Chip launched an e-store, www.cchipstore.com, to automate and increase efficiency in the sales and support process. The Company is expected to aggressively pursue acquisitions in the security services market and to take additional steps in marketing its products. Within two to three years, management is targeting $50 million in revenue contributed by the security services division.




Balance Sheet on March 31, 2004

(Giving effect to the acquisition, US $ 000)





Cash & s-t investments
361
---
Short-term debt
214

Other current assets
748
---
Other current liabilities
417

Total current assets
1,109
---
Long-term debt
0

PP&E
71
Other long-term liabilities
0

Goodwill & intangibles
874
---
Shareholders’ equity
1,422


Total assets
2,054
---
Total liabilities & equity
2,054




On March 31, 2003, prior to any new major capital raise for C-Chip, the Company had working capital of US $477,000. Long-term assets included goodwill and intangibles of $874,000 of which $385,900 was goodwill from the acquisition of CSA. There were $214,000 loans from related parties bearing no interest that have no fixed repayment terms, but no long-term debt. Stockholders’ equity consisted of approximately 36.0 million common shares, of which approximately 13 million shares are restricted, with $.00001 par value.




Income Statements

(FY ends June 30, in US $ 000, unless otherwise noted)




---
Q 3/04A
Y6/04E
Y6/05E
Y6/06E
Y6/07E

Revenue
421
1,214
9,000
22,000
58,000

Gross profit
148
423
2,500
7,000
20,800

Gross margin (%)
35
35
28
32
36

SG&A expense
(660)
(1,700)
(1,400)
(2,800)
(9,900)

R&D expense
(132)
(323)
(650)
(1,100)
(3,000)

Other operating expense
(45)
(200)
(400)
(500)
(500)

Operating income (loss)
(690)
(1,797)
50
2,600
7,400

Interest income (expense)
(8)
(1)
0
0
0

Tax expense
0
0
0
0
(2,500)

Net income (loss) (a)
(698)
(1,798)
50
2,600
4,900

EPS (US $)
($0.02)
($0.05)
$0.00
$0.05
$0.09

Avg. shares (000s)(diluted)
30,982
36,021
52,000
52,100
52,200




(a) Although the Company did not pay taxes in FY 2003, NOL carry-forwards should expire within two years and a tax rate of 34% to apply in future years.




There is no way to estimate the Company`s revenue and earnings prospects with any degree of precision, because there are myriad variables that might impact future results. Nevertheless, there is enough information to develop a set of assumptions upon which an earnings model can be built, with the understanding that the model is subject to significant revision if there are changes to the underlying assumptions. For example, there is a likelihood that during these years the Company will make acquisitions and raise additional equity capital, thereby altering the earnings outlook presented above.


Our estimates are based on the current fiscal year ending in June. However, since C-Chip has not yet experienced a full year of sales operations, it is difficult to provide estimates for each line item. We have projected the Company’s top-line based on three product lines (Credit Manager, Shadow and Hawk) and one services division (CSA). During the upcoming fiscal year, we project more than 50% of revenue from distribution channels and OEM agreements. Within two years, we project C-Chip will become a full-service monitoring company and its services and products divisions will be intertwined. In our estimation, aggregate revenue will grow from $1.2 million in FY 2004 (fiscal year ending June 2004) to approximately $9 million the following year. As U.S. distributions and OEM channels open, we expect revenue to grow by more than 140% to approximately $22 million with sustained triple digit growth for two to three years.


To delve deeper into our model, in regards to the credit manager line, we expect the Company to sell approximately 2,000 units in the fourth quarter, with a substantial unit increase of 25% per quarter assuming constant prices. In the first year, we project 15,000 units to be sold through direct and indirect channel increasing to nearly 60,000 units the following year. Still, if C-Chip realizes only $50 per unit (the retail price should be significantly higher) and 50% of customers renew at least once (at a $25 renewal rate), the Company would yield estimated revenue of approximately $20 million from this segment within three to four years.


The "Shadow" product line can be modeled using similar methods. In this division, we assume a significantly higher $150 price per unit. Additionally, we assume that 10% of customers will choose an option at an average price of $10 per unit. Lastly, there is an annual service fee of $45 for up to 36 location-tracking requests per year. We estimate 5,000 units being sold in the first quarter (1Q 2005) increasing by 25% sequentially in future quarters. Based on these estimates, we project nearly 30,000 customers by the end of FY 2005 and more than 250,000 customers within three years. Sales should reach $5.6 million in FY 2005 climbing to approximately $30 million within two years.


C-Chip’s Hawk and Falcon RFID "kill switches" are likely to be primarily sold as options with the Shadow. However, the Company may obtain stand-alone sales especially in the sports vehicle market. Our conservative estimate is for 1,000 units to be sold this quarter (4Q 2004) with an increase to at least 3,000 per quarter by FY 2006. The price per unit is $45 and this pricing could remain constant for the next several years. Therefore, our estimated revenue in the RFID sector for FY 2005 is $300,000 increasing more than 150% to $800,000 in FY 2006 and $2 million in FY 2007.


The Company recently acquired CSA, a provider of security services in the Canadian market. While the acquisition is on pace for $2 million in annual revenue, it is difficult to project future growth since acquisitions and organic expansion is likely. For modeling purposes, we are assuming 10% growth each year prior to any M&A activity. Still, the Company can aggressively build this division since many competitors are small "Mom & Pop" operations.


C-Chip is in an enviable position, as it can potentially achieve gross margins of over 25% from its services divisions and even higher gross margins (25-55%) from its product lines without incurring large fixed costs. We conservatively project blended gross margins of approximately 25-35% for the initial two years trending to 40% in the outer years. On an operating basis, profit margins of 10-20% are within reach, and we have projected operating margins of more than 10% by year-end 2006. Due to significant net operating loss carry-forwards, we do not anticipate the Company paying taxes for the next two years. However, a rate of 34% should apply thereafter.


Investors are cautioned that the preceding exercise is based on a set of assumptions that are highly speculative and subject to change. There is no guarantee that the Company will achieve the indicated overall results.




Statements of Cash Flows

(in US $ 000s, unless otherwise noted)





Nine months ended:
March 2003

Cash flows from operating activities:

Net income (loss)
(3,010)

Other operating activities, net
2,020

Net cash provided by (used in) operating activities
(990)

Cash flows from investing activities:

Net cash provided by (used in) investing activities
(297)

Cash flows from financing activities:

Net cash provided by (used in) financing activities
1,637

Net increase in cash & equivalents
353




Note: C-Chip did not commence operations until May 2003.




The Company will likely require additional financing to achieve its core business objectives. We estimate the current cash burn rate (prior to significant revenue) to be $150,000 per month. To this end, we anticipate the Company raising approximately $2-$3 million within the next 12 months. Still, we expect the Company to achieve positive operating cash flow within two to three quarters as a result of the initial product launch in North America. Investors should focus on C-Chip’s ability to raise capital and sign partners and distributors in assessing the level of risk of this investment.


On April 29th, C-Chip Technologies closed an equity financing of $1.65 million to institutional and accredited investors. In aggregate, 2,538,482 common shares were sold at a price of $0.65 per share with additional one-for-one warrant coverage (at $1.10 per share). When the registration becomes effective, investors will have an option to purchase an additional 1.65 million common shares at a price of $1.00 per share with warrants at $1.50 per share. If all warrants are exercised, we anticipate proceeds of approximately $8.6 million from the offering. C-Chip will use most of the funds to increase its sales and marketing team.





Shareholder Profile

(February 19, 2004)





Total common shares issued and outstanding
35,951,622


Float (estimated)
20,900,000

Employee stock options Outstanding ($0.20-$0.89, expire 2008)
2,665,000

Warrants Outstanding (@ $1.00)
3,873,637


Total fully diluted shares outstanding
42,490,259


Significant Equity Holders

Stephane Solis, CEO
500,000

Capex Investments Limited (controlled by officers)
9,819,210

Liberty Metal Fund Ltd.
1,940,000

Professional Trading Services
1,900,000

Global Select Opportunities
1,600,000

9129-2763 Quebec Inc (CSA Acquisition)
1,600,000

Whitehall Premier Growth
1,600,000




Executive officers & directors as a group

(Excluding Capex, 6 Persons)
1,470,000




Note: This table depicts beneficial ownership as determined in accordance with the rules of the SEC; some of the shares may be double counted.

As part of the reverse merger that enabled C-Chip to become a public entity, Capex received shares of the company as well as a promissory note of $500,000 bearing no interest payable in full on January 30, 2003, 250,000 restricted shares of common stock and a convertible debenture of $2,000,000 maturing on January 15, 2007 and carrying a coupon of 2.5% payable at the option of the holder in "restricted" shares of common stock. In FY 2004, the debenture was fully converted into equity and Capex owned 9.8 million shares, approximately 28% of the shares outstanding.


At the time of the SB-2 filing on February 19, 2003, there were approximately 35,951,622 common shares outstanding, with a float of approximately 58%, or 21 million shares (due to private placements, mergers and acquisitions). Directors and officers directly hold 1.5 million shares, or less than 5% of the Company. However, including Capex Investment Ltd., a company controlled by members of C-Chip’s board of directors, the percentage ownership is approximately 30% of the Company. While there are no preferred shares or convertibles outstanding, there are warrants to purchase 3.9 shares. Still we have not incorporated all of the warrants in the above fully diluted share count since many of the warrants are currently out of the money. We have used the treasury method of accounting to calculate fully diluted shares. Therefore, proceeds from the exercise of options and/or warrants are used to buy back shares of the Company.




Selected Investment Considerations





•
Telemetry and M2M Industry Expansion. Although the Telemetry and M2M industries are poised for robust growth, there is limited visibility regarding revenue related to specific devices and applications based on the technology.


•
Competing Products. The Company is competing against larger companies that have established brand names and may be able to attract better distribution channels and customer purchases. The Company’s success will be dependent upon market acceptance of its products and services, and there can be no assurances in that regard.


•
Financing. The Company may require additional financing to achieve its short-term business objectives. The Company has incurred losses and negligible revenue to date, and therefore remains unprofitable. There is no guarantee that any such financing will be available on acceptable terms or that the Company will be able to raise this capital in a reasonable time period.


•
Stock Considerations. The stock is thinly traded, has exhibited price volatility, and is a bulletin board stock subjecting broker-dealers to additional sales practice and disclosure requirements. The shares are appropriate only for risk-oriented investors.


•
Other Risks. Additional risks are outlined in the Company`s investor materials and SEC filings, and these are hereby incorporated by reference.





Stock Valuation


In view of the negligible revenue streams from Company operations and the fact that the Company is expanding rapidly into new markets, there is no readily available model to value C-Chip common shares. One possible method is to use a competitive analysis to analyze C-Chip relative to its peers. Additionally, a PEG valuation (price to earnings over growth) should be used for a stand-alone analysis. Since many of the companies within the telemetry and M2M industry are private and fledgling companies, only four public companies are used as the basis of comparison. These companies are U.S.-based companies that have software or hardware based solutions in the telemetry or M2M market with a market capitalization under $500 million and available analyst estimates. They include At Road (ARDI/OTC), Garmin (GRMN/OTC), LoJack (LOJN/OTC) and Trimble (TRMB/OTC). There are several additional public companies with related technologies that could be used as comparables, but these enterprises do not have analyst estimates available for future periods. These companies include Aether (AETH/OTC), Alanco (ALAN/OTC), AXCESS (AXSI/OTC), Boomerang (BMG/TSX), MinorPlanet (MNPQC/OTC Pink Sheets), and Wire Matrix (WRX/TSX).



Comparative Valuation Analysis



Telemetry / M2M Companies
Price on 5/24/04
Market Cap ($ mil)
P/E LQA
P/E 2004E*
P/E 2005E*

At Road
8.13
474
40.7x
32.5x
18.9x

Garmin
33.08
3,612
25.8x
18.3x
16.1x

LoJack Corp
7.98
124
20.0x
12.9x
10.8x

Trimble
25.00
1,355
23.1x
21.9x
19.8x


Average
27.4x
21.4x
16.4x


C-Chip
0.98
35
NM
NM
39.7x





* based on analyst consensus estimates.




Since C-Chip is an emerging company with negligible historical sales and profits, it appears to be overvalued on a Price over Earnings basis relative to its competitors even on a forward looking basis. The Company’s P/E ratio for projected earnings in calendar year 2005 is significantly above the group’s average since we only expect the Company to earn $0.02 per share in the period. Still, using FY 2006E estimates of $0.05 (ending in June 2006, two quarters later), we arrive at a $0.82 valuation.


An absolute valuation provides a much more realistic estimate for the company’s worth. We estimate a three-year top-line CAGR for C-Chip (FY 2005E-FY 2008E) of approximately 250%, with earnings growing even more rapidly (unfeasible to calculate due to earnings losses). If we use 25% as a conservative long-term estimate for bottom-line growth and a conservative PEG of 1.5x (using fiscal year 2006E EPS of US$0.05), C-Chip’s shares can be valued at $1.90 per share, or approximately two times its recent trading range.




Officers and Directors

(ages as of June 30, 2003)


Stephane Solis (45), President and Chief Executive Officer. Mr. Solis joined C-Chip in November 2000, first as consultant, then as its Chief Financial Officer. He was appointed to his current position in January 2003. Previously, he was Director of Innofone.com, and held various positions at Groome Capital.com, Yorkton Securities Inc., Lombard Odier, and Midland Doherty (predecessor to Merrill Lynch Canada). Additionally, he co-founded GLS Capital Inc., an institutional research boutique specializing in the information technology sector that was sold to Yorkton Securities. Mr. Solis continues to serve as Director of Equilar Capital Corporation, a position he has held since 2001.


Benjamin Leboe (58), Chief Financial Officer. In addition to his CFO position at C-Chip, Mr. Leboe is Principal of Independent Management Consultants of British Columbia, Vice President & Director of China World Trade Inc. and CFO and Director of Asia Payment Systems Inc (formerly Asian Alliance Ventures Inc.) and Develstar Financial Corporation. Previously, he was CFO of China IT Corporation, ePhone Telecom, Inc and VECW Industries Ltd. A former Partner with Peat Marwick Stevenson & Kellogg in British Columbia, Mr. Leboe is a Chartered Accountant and Certified Management Consultant.


James Mashtoub, Chief Operations Officer. Mr. Mashtoub joined the C-Chip team in 2003. Prior to joining C-Chip, Mr. Mashtoub served as president of PNP systems, of Montreal, a software design and consulting company in areas of quality control such as ISO standards. From 1997-2000, Mr. Mashtoub was President and CEO of Speedomax Enterprises International of St-Eustache, Quebec, a company active in automotive instrumentation, interfacing with all vehicle systems. He headed the R&D, Sales and Finance departments of the company.


Claude Pellerin (33), Vice President, Legal Affairs. Mr. Pellerin joined C-Chip as Vice President of Legal Affairs in February 2002. Additionally, he has served as Secretary of Equilar Capital Corporation and Vice President of Finance for the Gescorp Nominair Inc. Mr. Pellerin graduated from law school at the University of Montreal and is pursuing a master`s degree in business law at the university.


Richard Palmer, Vice President, Sales. Mr. Palmer recently joined C-Chip as Vice President of Sales. Previously, he was the co-founder, President and CEO of Bedford Communications, Inc., a Florida-based company. Additionally, Mr. Palmer co-founded Cable Satisfaction International, Inc. and was the founder and President of Audio-Sat Services, Inc (sold to the Weather Channel). In the 1980`s, Mr. Palmer was Director, Eastern Canada, for Canadian Satellite Communications (Cancom).


Robert Clarke (59), Chairman of the Board of Directors. Mr. Clarke is Chairman and Chief Executive Officer of 7bridge Capital, a private venture capital group based in Hong Kong, and is Chairman of the Board of Directors of Asia Payment Systems Inc (formerly Asian Alliance Ventures Inc.). Previously, he served in various top management and director positions at ePHONE Telecom Inc., Waverider Communications Inc., TEK Digitel Corp. and Innofon.Com Inc.


John Fraser (57), Director and Secretary. Mr. Fraser serves on the C-Chip board and is the Corporate Secretary. Additionally, Mr. Fraser is President and a Director of Asia Payment Systems Inc. (formerly Asian Alliance Ventures Inc.) and a director of Walters Forensic Engineering, a public engineering firm based in Toronto, Canada. He is a founding shareholder of 7bridge Capital, Hong Kong and is a director and Vice Chairman of Hincks Dellcrest, a non-profit organization located in Toronto, Canada. Previously, Mr. Fraser was a Vice Chairman of KPMG Canada and was a director of ePHONE Telecom Inc. (OTCBB: EPHO).


Cherry Lim (38), Director. In addition to serving on the board of C-Chip, Ms. Lim is currently President of 7bridge Systems (HK) Limited, a Hong Kong based telecommunications company. She began her career in manufacturing. However, since 1990, she has worked in various positions within the telecom industry including SingTel in Singapore, Deustsche Telekom in Hong Kong, and eGlobe, Inc.

[turbozertifikat]

genau alle Zocker aufmerksam machen, sehr

[Vershofen]

ich denke da geht jetzt auch wirklich was. Sobald die 1,07 $ überwunden sind und das könnte schon Morgen sein, wird die Aktie explodieren!


hängt ein wenig davon ab ob der Newsflow weiter so positiv bleibt. Aber davon gehe ich eigentlich aus!

[turbozertifikat]

von was Du ausgehst interresiert sowieso keinen, lass doch die Aktie laufen...

[JackLev]

man sollte alle Aktien laufen lassen, ob rauf oder runter

[Gwaihir]

und trotzdem wiedermal kaum Nachfrage in Frankfurt und Berlin

[Vershofen]

wieso kaum Nachfrage? Geldkurs bei 0,88 Euro... Das Angebot ist auch äußerst schwach...



Heute werden die 1,07 genommen, jede Wette!


Die Aktie zieht in den USA bei starkem Volumen an! Also kann das schon mal kein billiger Push sein. Ich bin langfristig dabei!

Mein Kursziel: 2-3 $

[Vershofen]

0,89 in Frankfurt, Briefkurs zieht auf 0,90 euro an! Das macht so richtig Spaß! Wartet nur bis die Amis heute eröffnen. Mein Tipp für den Schlusskurs von heute:

1,12 US$

[Nuno]

Kaufe CCHI in Frankfurt nach !

Habe 0.89 E Kaufkurs z.Zt. in Frankfurt drin, 3000 Stück !
Wenn die durchgehend, denke schon, habe ich genug und die
Kursrakete, von Vershofen angekündigt, kann starten.

Warum zog in USA das Volumen in den letzten 2 - 3 Std.
deutlich an ? Ist da was im Busch ?

Normalerweise wird es doch zum Handelsende ruhiger !

Sollte die 1,08 $ deutlich und nachhaltig genommen werden,
ist das kurzfristige 1te Kursziel ca. 1,30 bis 1,35 $

Wenn nicht, ist auch nocheinmal 0,85 $ drin !

[Nuno]

Mist, noch keine Ausführung !

[Vershofen]

der Grund für den Kursanstieg dürfte die obige Analyse sein, die ein Kursziel von 1,90 $ angibt. Das ist auch das was ich mir als Minimum erwarte. http://www.stocksontheweb.com/cchi.htm

Kann gut sein, dass du zu 0,89 in Deutschland nichts mehr bekommst. Denn in den USA wird es wohl heute gleich zur Eröffnung ein Stück hoch gehen. Dafür spricht eben, dass das Volumen in den letzten beiden Handelsstunden angestiegen ist.


vielleicht kommen ja heute auch noch News vom Unternehmen, wer weiß...

[kopfeck]

Hallo

Da können es einige nicht erwarten einzusteigen

bid 1.07 ask 1.08 6000 stück

( Scottrader )



Kopfeck

[Vershofen]

Wiederstand überwunden, aktuell 1,08 US$ Umsatz ist hervorragend in den ersten 12 Minuten 216.000 Stücke gehandelt.

[Vershofen]

das macht richtig Laune, mittlerweile 1,09$. Die Aktie hat damit lupenrein den Ausbruch geschafft und es dürfte schnell weiter nordwärts gehen!

[kopfeck]

das wars dann erstmal,mal sehen ob es wieder über 1,07 geht.

[Nuno]

Sehr schönes Volumen heute in USA.
Da wird noch, wir sind kurz vor dem Sprung !

[Vershofen]

heute eine kleine Verschnaufpause...

In Deutschland gibts gerade einige günstige Aktien zu 0,84 Euro, das liegt deutlich unter dem aktuellen US-Kurs von 1,035 US$