LOCK<--another Firm .initiates coverage ....on LOCK....explaining in further detail..
--------------------
PRN QUANTUM GROUP, LTD. BEGINS COVERAGE OF SAF-T-LOK WITH A SELL REC
Feb 5 1998 10:32
mmendation
NEW YORK, Feb. 5 /PRNewswire/ -- The following was issued today by
Quantum Group, Ltd.:
Saf-T-Lok (Nasdaq: LOCK) has enjoyed a recent appreciation of over
300 percent in the price of their shares. This Florida-based company is in
the business of marketing a combination trigger lock for guns. Quantum
believes the recent rise in the stock is due to the incentives that were give
to a PR firm and a brokerage firm. If the shares of Saf-T-Lok trade above
3 dollars a share state street securities, marketing direct concepts and a
business consulting firm receive over 2 million dollars. Quantum believes
this incentive has caused aggressive marketing of the stock that has pushed
the shares of Saf-T-Lok to unrealistically high levels.
Sales
The latest reporting quarter Saf-T-Lok reported sales of 5 thousand
dollars and a $300,000 loss. Saf-T-Lok has a marketing plan similar to last
year which leads Quantum to believe the sales of Saf-T-Lok will not be
significant in the short term. Saf-T-Lok issued a recent press release sayin
that they received an order totaling $550,000 from a newly formed company
called United Safety Action Inc. based in Muncy, N.Y. From Quantum's
understanding this is a newly formed company without a sales force whose
principal has limited experience in the firearms industry. These facts caus
Quantum to believe this sale may be an indication of interest and may not
follow through. Quantum believes Saf-T-Lok will remain unprofitable for the
foreseeable future as they have not demonstrated any ability to generate sal
of these patented locks.
Market Capitalization
Saf-T-Lok currently has over 15 million fully diluted shares outstanding
The current market capitalization is over 75 million dollars. Saf-T-Lok is
an industry that Quantum believes would not command a high price earnings
ratio even if the company ever was to be profitable. Gun manufacturers
estimate this industry grows at a rate under 5% per year. To justify curren
valuations, Quantum feels Saf-T-Lok would have to earn in excess of
8 million after tax dollars per year. Saf-T-Lok would have to capture a
significant part of the market to accomplish this. Major gun manufacturers
have come out with announcements that they are equipping new guns with
products other than Saf-T-Loks. Quantum believes this current market
capitalization will not be maintained.
Insider Stock Sales
Over the last year officers and directors have sold their shares in Saf-T-Lok at an alarming rate. Franklin Brooks, the inventor of Saf-T-Lok has
sold over 280,000 shares. William Schmidt has sold 88,000 shares. John
Gardner, the newly appointed president sold 200,000 shares. Eugene Horanoff
sold 47,000 shares. Jeffrey Brooks recently sold 50,000 shares. These sales
make Quantum question the confidence this management has in Saf-T-Lok.
Conclusion
Quantum believes the shares of Saf-T-Lok are currently trading at
unsustainable levels. Recent speculation and aggressive marketing of the
stock of Saf-T-Lok have driven the shares to an unrealistic price.
This is a company that has generated nothing but losses and will continue
to do so for the near future. Quantum believes the rise of these shares is a
function of short term incentives and not because of company fundamentals.
Quantum is setting a twelve month target of under 1 dollar a share.
This report should not be considered a solicitation to generate new
clients and is not intended for distribution. Quantum Trading is a
New York-based trading firm and maintains a short position in Saf-T-Lok.
SOURCE Quantum Group, Ltd.
-0- 02/05/98
/CONTACT: Steven Ehlers of Quantum Group, 800-409-4445/ |
