Feature Report: Phinder Technologies Inc.

The Micro Cap Press research staff has uncovered what it believes to be a highly-promising, early-growth stage company. Sales growth has been impressive, easily outpacing many of its peers, and perhaps on the verge of further exponential increases. Further analysis also uncovered this company controls some relatively exclusive licenses in a key emerging market. Based on our combination of technical and fundamental standards, we encourage you to review this feature report for more details on this company's upside potential. 
 

Overview

Phinder Technologies Inc. (OTCBB: PHDT) is a wholesale VOIP provider of telecommunications (voice and data) services, specializing in international carrier-to-carrier connections. The majority of their current focus is on the fast-growing Latin American market, though the company has and continues to develop business opportunities in other overseas markets. However, the company is not limited strictly to providing the connection between major carriers. Phinder's three revenue arms include: 

• International Long-Distance Services: Operating under the name 'Zupintra', this venture originates international connections for the major domestic carrier's customers. 
• 'Local' Phone Company Licensing: Zupintra can establish a presence in an overseas market, and be the infrastructure for other carriers within that country or region. These licenses also permit the sale of ancillary services like calling cards, IPTV, cell phone service, etc. 
• Retail Products (Primarily Pre-Paid Calling Cards): The calling-card industry is growing rapidly, but it is particularly lucrative in Latin American markets where phones are relatively scarce, and a calling card may be the only viable option.

Background

On July 20th of 2006, the acquisition of KBD Inc. was complete. KBD, bering a VOIP service provider, put Phinder in the telecommunications service business. On the same day, the company announced that telecom was intended to be the company's sole focus going forward. The following quarter, Phinder began generating limited revenue from its VOIP platform. 

On March 19th of this year, Phinder announced a joint venture with Italba Corporation, called Zupintra Panama. The aim of the venture was to develop next-generation telecom services in Latin America and the Caribbean. By May 4th, the company had completed the initial construction phase of the Latin America network. 

Zupintra officially began driving revenue on May 22nd of this year, after the Argentina and Uruguay networks became operational. Other Latin and South American networks are still being established, though the company anticipates they will also be operation in the very near future. 

The timing of these new ventures, and the exit of previous business enterprises, should be noted when comparing recent results with historical results. Previously-owned Axcess Internet Solutions went through a wind-down period before officially being taken off the books during the last quarter. The VOIP offer technically began in the company's 2nd quarter of its fiscal 2007, which was the 3rd quarter of calendar 2006. However, the size of the current telecom opportunity dwarfs the amount of revenue the company was able to produce just less than a year ago. 

Moreover, it should be noted that Phinder's capacity and licensing rights have only been fully developed within the last several weeks. As such, the company's history may or may not provide a full indication of its potential growth. We anticipate the company will report revenues of approximately $10 million once their full fiscal 2007 results (year-ending March 31st) are released. However, we also agree with the company's own revenue forecast of $2.5 million per month by the beginning of their 3rd quarter. Annualized, that would equate to $30 million in revenue per year, and is likely to push earnings into positive territory.
 

Industry Analysis

Phinder Technologies is classified as a telecom stock. Yet, there are very few other stocks or companies to make legitimate direct comparisons to. In some senses it's an outright telecom carrier, not unlike AT&T (NYSE: T) or Verizon (NYSE: VZ). In other ways, since their focus is providing the service those major carriers actually outsource, a better comparison might be made against the pure long-distance providers - most of which are not known names - like Primus Telecommunications (PRTL.PK). Or, one could justify comparing Phinder to a company strictly providing VOIP service, such as Vonage Holdings Corp. (NYSE: VG). 

To provide a relevant landscape, all the major telecom peer groups have been compared. Note how margins are significant in almost all cases.

PEER GROUP: Domestic Telecom

PEER GROUP: Long Distance Providers

Overall, gross margins as well as net margins are very wide within most facets of this industry. We expect Phinder to do at least as well as its peers once all of its planned profit centers become operational.

Though not the only service provider using the technology, Phinder is one of the few providers utilizing VOIP as its means of transmission on such a mass scale. The cost of utilizing this type of service is not only considerably less for the end user, but also for the provider. The company intends to keep their per-minute offer competitive by passing along a large portion of those savings to their carriers/customers, yet costs are still phenomenally low relative to the traditional analog type of connection. 

Simultaneously, Phinder will be able to do what many VOIP providers do not do, which is bill on a per-minute basis. Vonage's subscription fee may provide consistent cash flow, but coverage is limited, and the costs to provide the service they do can vary even if the monthly billing amounts do not. By offering connections on a per-minute basis, Phinder retains control of their costs, only paying for what they use, but always generating a positive margin per-minute no matter how many minutes their customers need.
 

Financial Analysis

Phinder's entry into the telecom business has fruitful. Revenues have grown seven straight quarters, with sales reaching the $3 million/quarter mark as of the quarter ending on December 31st, 2006 (the company's Q3 of fiscal 2007), topping the previous Q3's total of $1.7 million. This brings the year-to-date total up to $8.2 million (through the first nine months of last fiscal year, which ended on 3/31), versus just $2.9 million for the same period a year earlier. 

However, those prior results are considerably less than the company's plans for the future. Through the end of the last reported quarter, and even through their fiscal Q4, the majority of the company's telecom business opportunity had been untapped. Only in the last few weeks have these profit centers started operating, with the majority still waiting for launch. 

Looking forward at these opportunities through Zupintra Panama, Phinder expects to be doing $2.5 million in sales per month by the end of their Q2. Annualized, this translates into $30 million per year. 

With approximately 70 million shares issued and outstanding, the market cap is around $16 million when shares are at their current level of 18 cents. On a per-share basis, $30 million in annual sales would mean 42 cents per share in annual revenue. At that level, the price/sales ratio is about 0.45. For comparison, a price/sales ratio between 1.9 and 2.3 is the norm within the telecom industry. Based on future revenue expectations, the argument could be made that PHDT shares are trading at about a 75% discount to their potential value.

In terms of earnings, the company appears to be making commensurate progress towards profitability. Recent quarterly results have been close to positive - never worse than a loss of 2 cents per share since Q2 of fiscal 2006, and very close to a break-even for a couple of those periods. This, however, was the bottom line result when revenues were consistently less than $3 million per quarter. If and when Phinder generates their expected $7.5 million in quarterly revenues, fixed costs should be more than covered be the company's gross margin potential we detailed in the industry analysis section. As a result, Phinder could swing to a profit in the foreseeable future.
 

Competitive Analysis

Phinder has a presence in the 'originating' telecom market by providing connection services for the major carriers on a per-minute basis. The 'local' phone companies Phinder intends to build in Latin American markets will serve as a connection 'termination', which also receives a portion of the per-minute long-distance charge. Through Zupintra Panama, the company will also collect fees by acting as an intra-network carrier for those local Latin and South American markets. 

Additionally, Phinder can provide that market's customers with pre-paid calling cards. Those calling card users will in turn use Phinder's origination and termination lines, effectively giving those minutes back to the very company supplying them in the first place. Acting as a front-end, back-end, and intermediary, Phinder has multiple ways to create revenues. 

Further, telecom licenses in most of the Latin American market are difficult to acquire. Through Zupintra Panama, Phinder controls these rare licenses in a lucrative market, while potential competitors should face a significant barrier to entry. 

Phinder is capable of maintaining up to $10 million worth of billing at a time. With an average billing cycle of 30 days, the company can use the $10 million credit capacity about 12 cycles per year. As a result, they now have the potential to annually issue up to $120 million worth of invoices. This level of billing flexibility allows Phinder to attract the business of major carriers like AT&T or Verizon, while most other small providers can't accommodate companies of such size.
 

Learn More

For more information regarding Phinder as an investment opportunity, be sure to review the complete research report in a printable PDF format by clicking here.

Or, contact: 
The Micro Cap Press 
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Click Here or go to http://www.microcappress.com/disclosure/ to view our compensation on every company we have ever covered, or visit the following web address: http://www.microcappress.com/disclosure/reports_disclosure.php

Pacific Shores Investments, LLC has been paid a fee of $30,000 cash and 800,000 shares of newly issued restricted stock by Phinder Technologies, Inc. for coverage of the Company. Additionally, a managing member of Pacific Shores Investments, LLC has purchased 50,000 shares of PHDT in the open market with a cost basis of $.23 cents per share.

From time to time PSI sells shares received as compensation for coverage of client companies. Shares received are sold in the open market. Since the shares are received as compensation for services as previously disclosed, and not for investment purposes, PSI does not view the sale of the shares as contradictory to any opinions delivered in the content. This should be viewed as a conflict of interest by shareholders or prospective shareholders of the client companies.

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