Finding winners among penny stocks can be tricky

If only more penny-stock company executives showed the kind of commitment that Donald McGhan had to MediCor Ltd., a Las Vegas-based manufacturer of breast implants.

MediCor Chairman McGhan was willing to steal $54 million to keep the Over-the-Counter Bulletin Board company going, but it all ended for naught.

Meanwhile, Samaritan Pharmaceuticals and CardioVascular BioTherapeutics Inc., both of Las Vegas, are doing business, but it’s hard to tell how well. Samaritan Pharmaceuticals hasn’t filed financial reports with the Securities and Exchange Commission for two years; CardioVascular BioTherapeutics hasn’t reported financial results to the SEC in three years.

These are just some of the locally based companies with publicly traded penny stocks that investors buy and sell on the Over-The-Counter Bulletin Board or the Pink Sheets.

Investors can find gold nuggets amid the penny-stock rubble, but analysts said it’s easier to get burned than it is to make money.

"Anybody who wants to play these stocks has to be willing to lose their entire investment," said Harvey Cohen, a retired executive who helped numerous small companies go public with stock offerings.

He was chief financial officer of Vegas Chips, a potato chip company that earned a listing on the Nasdaq and had its products carried by Vons supermarkets around 1990. But the company got bloodied trying to compete with big-name national brands and eventually was sold, Cohen said.

Investing in penny stocks is more akin to betting on roulette or playing the lottery than it is to buying and holding billion-dollar blue-chip companies with names known around the world.

"It’s a huge risk," Cohen said. "Four out of five (penny stocks) have to be outright frauds."

In good times, penny-stock promoters try to appeal to people with extra money for investments, Cohen said.

"When times are bad, everybody hopes and dreams and they think they can turn $1,000 into $10,000 with a penny stock," Cohen said. "This has to be money you can afford to lose."

Jag Mehta, a chartered financial analyst and adjunct professor of finance at the University of Nevada, Las Vegas, invests in some small-cap stocks, but he warns that investors must do continuous in-depth research to find worthy companies.

"Generally, I tell people to stay away from penny stocks," Mehta said. "They are companies you know little about."

Instead, Mehta suggested that casual investors invest in mutual funds that hold small-company stocks. He recommends Pinnacle Value Fund (ticker: PVIX), Wasatch Micro Cap Fund (ticker: WMICX) and Wasatch Microcap Value Fund (ticker: WAMVX).

But investors with the expertise and diligence to research small-cap companies can find gems that Wall Street analysts haven’t noticed, Mehta said. He screens data from the American Association of Individual Investors to find small-cap stocks that have solid financials.

He mentioned one jewel he found: Elron Electronics Industries (ticker: ELRNF.PK, Pink Sheets), an Israeli company with $60 million in cash.

"This company has been in business for the last 49 years," Mehta said in an email. "It pays extraordinary large dividends every time it has a large amount of cash collected. It is an unusual company."

On the other hand are penny stocks like McGhan’s MediCor Ltd., the breast implant manufacturers.

McGhan, 77, is serving a 10-year sentence for wire fraud at the Bastrop Federal Correctional Institution in Texas.

A lawsuit filed in January by the Securities and Exchange Commission blames McGhan and his son, Jimmy Joe McGhan, also of Texas, for diverting $54 million of real estate investors money into MediCor. The elder McGhan was MediCor’s chairman; his son was MediCor’s chief operating officer.

The money came from investor clients who entrusted Henderson-based Southwest Exchange with money from the sale of real estate so they could delay income taxes on capital gains. Donald McGhan also controlled Southwest Exchange.

MediCor, which had shares traded on the Over-the-Counter Bulletin Board, filed for bankruptcy in 2007 after Southwest Exchange was closed and MediCor lost is primary source of money. MediCor was dissolved in November.

Las Vegas seems to attract medical companies. Samaritan Pharmaceuticals (ticker: SHPC.PK, Pink Sheets) and CardioVascular BioTherapeutics (ticker: CVBT.PK, Pink Sheets), both of Las Vegas, have penny stocks. Neither has filed any recent financial reports to the SEC, however, so it’s difficult to know how well they’re faring.

In a telephone interview, Samaritan Chief Financial Officer Eugene Boyle was repeatedly asked why the company didn’t regularly make public reports of financial results and refused to answer. Boyle said the Las Vegas Review-Journal should find a securities attorney and ask that attorney about Samaritan’s lack of recent financial statements.

Samaritan’s last 10-K or annual report filed with the SEC showed that $100 invested with the company at the end of 2003 was worth $3.15 at the end of 2008.

In a February 2008 statement, the Las Vegas company said its sales revenue was growing but failed to disclose how much sales grew or quantify total sales.

CardioVascular last reported to the SEC on financial results for the nine months ended in September 2008. CardioVascular lost $4.7 million during that span. The company reported $574,000 in assets and a shareholder deficit of $12 million. The voice mail for CardioVascular spokeswoman Allison Caplan was full and she didn’t respond to an email.

Securities lawyer Ira Levine of Levine Garfinkel & Katz said companies with stock traded on the Over-the-Counter Bulletin Board are required to file regular financial reports, as provided in the Securities and Exchange Act of 1934.

Some companies with stocks traded on the Pink Sheets aren’t required to file financial reports with the SEC, he said. However, Pink Sheets companies must file regular reports if they have more than $10 million in assets and more than 500 investors, he said.

Samaritan and CardioVascular shares are traded on the Pink Sheets.

CardioVascular in December licensed Phase II diabetic wound-healing data from Merck Sharp & Dohme Corp., a subsidiary of Merck & Co., to use in developing pharmaceuticals.

Other penny-stock companies in Southern Nevada include MK Automotive, American Wagering and Power Efficiency Corp. All three companies have shares trading for less than a dollar.

Power Efficiency Corp. (ticker: PEFF, Pink Sheets) makes controllers for electric motors, including those used for escalators. Chief Financial Officer BJ Lackland said the company’s equipment has been installed at the Las Vegas Convention Center, McCarran International Airport and U.S. Capitol Visitor Center.

The company lost $3.3 million last year, down from $4.2 million in the prior year. Revenues totaled $577,000, up from $293,000 in the prior year. The company said it had a $2.7 million cash deficiency at year-end 2010 and has reported recurring losses from operations.

"Our auditors have stated that these factors raise substantial doubt about our ability to continue as a ‘going concern.’ " the company stated in its annual report.

Power Efficiency’s annual report said it needs to develop new products, find new customers and boost sales to existing customers to become profitable. The company is trying to raise additional capital.

Before investing in a company, Cohen said he insists on having audited financial reports, preferrably from a major national or regional firm. BDO USA, a national firm, audited the company’s financial results.

However, even audited financials may be bogus, Cohen warned.

The SEC in 2009 charged certified public accountant Michael Moore of Las Vegas of securities fraud for issuing false audit reports for 300 penny-stock companies. Moore agreed to a final judgment enjoining him from future violations, to disgorge $190,000 and to pay a $130,000 penalty.

Cohen noted that Power Efficiency was thinly traded. The company had the 11,200 shares traded on March 21 and a closing price of 11 cents, and Cohen figured that transactions for the day totaled approximately $1,400.

"If the broker tells you to buy it, hang up and change your number," Cohen said, laughing.

MK Automotive of Las Vegas (ticker: MKAU, Over-the-Counter Bulletin Board) franchises auto repair shops that do business as Mike’s Master Mechanics. Company spokesman Richard Groberg said MK Automotive has four franchised locations and operates six company-owned locations.

President Michael Murphy and Secretary-Treasurer Tracy Maurstad are married. The company started as a private corporation in 2002.

Mike Murphy and director Thomas Kubik own 87 percent of the company’s outstanding common stock. The company reported $3.4 million in net sales for the nine months ending Dec. 31, down from $3.5 million in the same period of the prior year.

The company almost broke even with a $5,600 loss for the nine months ended Dec. 31, compared with a loss of $347,000 a year earlier.

Contact reporter John G. Edwards at or 702-383-0420.

Dan Barnson steps down
Arbor View football coach Dan Barnson stepped down Friday after 12 seasons at the helm. Under Barnson, the Aggies won 104 games and became one of the top programs in Las Vegas. The Aggies went 12-2 in 2018 and won a region championship for the first time in program history. Barnson loves Friday nights, but said the 12-month commitment was getting exhausting.
NFR 2018 Highlights
NFR 2018 highlights from every round of this years rodeo.
NFR 2018 Round 10 Highlights
NFR 2018 Round 10 Highlights of the 2018 Wrangler National Finals Rodeo from the Thomas & Mack in Las Vegas, Nevada. (CBS Sports Network/PRCA)
NFR- Joe Frost
NFR Bull Rider Joe Frost talks about the difference in bulls and his family legacy with Cassie Soto before the last round of the National Finals Rodeo.
Herm Edwards on LV Bowl loss
Arizona State coach Herm Edwards talks about the loss in the Las Vegas Bowl. Video by Mark Anderson/Las Vegas Review-Journal
Fresno State linebacker George Helmuth after LV Bowl
Linebacker George Helmuth talks about Fresno State's turnaround. Video by Mark Anderson/Las Vegas Review-Journal
Youth cancer survivor receives gift bat at Winter Meetings
Cancer survivor Steven Mondragon, baseball player at Los Altos High in Hacienda Heights, California, received a complimentary bamboo bat during the Baseball Winter Meetings in Las Vegas, Nevada, on Dec. 12, 2018. (Ron Kantowski/Las Vegas Review-Journal)
NFR Day 9 Highlights
Highlights from round 9 of the 2018 Wrangler National Finals Rodeo from the Thomas & Mack in Las Vegas, Nevada. (CBS Sports Network/PRCA)
NFR 2018- Will Lummus Leads in Steer Wrestling
As NFR 2018 enters day nine, steer wrestler Will Lummus continues to see his name at the top of the standings. Las Vegas Review Journal host Cassie Soto speaks with the Mississippi native about his excitement to be participating in his first ever NFR.
John Saccenti on the Las Vegas Bowl's future
Las Vegas Bowl executive director John Saccenti talks about the game's future. Video by Mark Anderson/Las Vegas Review-Journal
UNLV's Mbacke Diong on his offensive improvement
UNLV forward Mbacke Diong talks about his offensive improvement. Video by Mark Anderson/Las Vegas Review-Journal
NFR dirt is the most important part of the rodeo
NFR has bull riding, saddle bronc, barrel racing, tie down roping, steer wrestling, team roping, and bareback riding but one of the most important part of the rodeo according to construction maintenance manager Allen Rheinheimer is the dirt that they all take place in. Review-Journal sports writer Ed Graney chats with Rheinheimer and ground man John Jamison to get an inside look at the dirt in Thomas & Mack at the National Finals Rodeo.
North Las Vegas Pedestrian-cyclist Survey
North Las Vegas officials are seeking comments from residents in hopes of bettering their experience in the city. An online survey has been set up for citizens to share their opinions and give their suggestions.
NFR Day 8 Highlights
Highlights from round 8 of the 2018 Wrangler National Finals Rodeo from the Thomas & Mack in Las Vegas, Nevada. (CBS Sports Network/PRCA)
NFR - Wyatt Denny Talks About Representing Nevada
NFR Bareback Rider Wyatt Denny talks to host Cassie Soto about being the only Nevada representative in the NFR this year and his skiing talent.
Junior NFR Offers Breakaway Roping for Girls
Unlike the NFR at the Thomas and Mack Center, the Junior NFR at the Las Vegas Convention Center offers breakaway roping for girls 19-and under. This event allows the young women of rodeo one more event to participate in, aside from barrel racing.
North Las Vegas Pedestrian-Cyclist Survey
North Las Vegas officials are seeking comments from residents in hopes of bettering their experience in the city. An online survey has been set up for citizens to share their opinions and give their suggestions.
NFR Day 7 Highlights
Highlights from the 7th go-round of the 2018 National Finals Rodeo in Las Vegas on Tuesday, Dec. 12, 2018. (CBS Sports Network/PRCA)
NFR- Jessica Routier
NFR Barrel Racer Jessica Routier talks about being at her first NFR, her horses, and her family with Cassie Soto in front of Thomas & Mack before round 7 of the National Finals Rodeo.
The Nevada State Museum
The Nevada State Museum of Las Vegas, located at the Springs Preserve, covers all eras of the state, from prehistoric to today.
NFR Day 6 Highlights
Highlights from the 6th go-round of the 2018 National Finals Rodeo in Las Vegas on Tuesday, Dec. 11, 2018. (CBS Sports Network/PRCA)
Las Vegas Bowl Teams Talk Shop at Maverick Helicopters
Arizona State, Fresno State talk to the media at Maverick Helicopters.
NFR- Will Lowe
NFR Bareback Rider Will Lowe talks with Aaron Drawhorn about his 15 years at the NFR, starting to ride at age 7, and renewing his wedding vowels this year in Las Vegas before night 6 of the National Finals Rodeo.
Veterans Village
Veterans Village and Veterans Village II were created to assist homeless veterans get back on their feet. (Mat Luschek/Las Vegas Review-Journal)
Holiday party cocktails
Veterans Village II Unveils Model Container Home
Veteran's Village II unveiled a model container home. The organization will be building 10 of these container homes to house veterans of the village. Mat Luschek/Las Vegas Review-Journal
NFR Day 5 Highlights
NFR Day 5 Highlights
NFR- Kory Koontz
NFR Team Roper Kory Koontz talks about his years at the event since 1992, his dynamic with a 23 year old partner Dustin Egusquiza, and how he contines to perform with diabetes with Aaron Drawhorn outside of Thomas & Mack before round 5 of the National Rodeo Finals.
Meet the woman behind the Las Vegas Bowl
Melissa Meacham-Grossman is the associate executive director for the Las Vegas Bowl. (Jason Bracelin/Las Vegas Review-Journal)
NFR Highlights Day 4
NFR highlights day 4
Tony Sanchez wraps up the UNLV season
UNLV football coach Tony Sanchez wraps up the season. Video by Mark Anderson/Las Vegas Review-Journal
The Mansion at MGM boasts hidden luxury
The Mansion at MGM, a hotel within a hotel, features 29 luxury villas for invited guests only. (K.M. Cannon/Las Vegas Review-Journal)
Goodwill of Southern Nevada
Under CEO John Helderman, Goodwill of Southern Nevada has expanded its services including the new home of Goodwill’s Veteran Integration Program. Free job services are paid for by revenues generated by Goodwill's retail stores. In 2017, the sale of donated goods allowed Goodwill of Southern Nevada to train more than 17,000 job seekers. More than 2,500 of those found local jobs. (Las Vegas Review-Journal)
Little bat company on verge of MLB deal
Larry Thein, part owner and one of only three employees of the Tat2 Bat Company of Davenport, Iowa, made the company's first bat in a hog barn. He spoke of the humble origins during a trade show at the Baseball Winter Meetings in Las Vegas, Nev., on Dec. 12, 2018. (Ron Kantowski/Las Vegas Review-Journal)
Texas Roadhouse opens in North Las Vegas
Texas Roadhouse has opened at on Craig Road at Bruce Street in North Las Vegas as part of an emerging "restaurant row." (K.M. Cannon/Las Vegas Review-Journal)
Holiday Parade Lights Up Downtown Summerlin
Holiday parade lights up Downtown Summerlin every Friday and Saturday night through Dec. 22.
Nevada's solar industry on the rebound
In 2015, the Nevada Public Utilities Commission voted in favor of a new tariff structure that reduced net energy metering buyback rates and increased fix fees for residential solar customers.
Apartment complexes selling fast in Las Vegas
Las Vegas’ apartment vacancy rate is among the smallest in the country, and rents are climbing faster than the national average. (LVRJ)
Aristocrat Opens $45M Campus In Summerlin
Aristocrat Technologies Chairman Ian Blackburne discusses the company's growth. (LVRJ)
Sunrise Hospital celebrates 60 years
Sunrise Hospital opened its doors to patients on Dec. 15, 1958. Employees of more than 35 years celebrated at a luncheon Wednesday, Dec. 12, 2018. Jessie Bekker/ Las Vegas Review-Journal.
Maya Cinemas to open soon in North Las Vegas
Moctesuma Esparza, CEO of Maya Cinemas, talks about the newest location in North Las Vegas, set to open Jan. 10. The aim of the theatre chain is to serve latino-centric, underserved communities.
Holiday shopping and returns make this the busiest time of year for UPS
The UPS Las Vegas South facility is the company's busiest pre-load operation in the country, and it's even busier this time of year. (K.M. Cannon/Las Vegas Review-Journal)
Primm’s outlet mall has fallen on hard times
The mall, attached to Primm Valley Resort, opened in 1998. Back then, it was a “textbook, perfect outlet-center location." But now, Primm’s outlet mall has fallen on hard times. Las Vegas Boulevard has endless shopping spots. And there are other outlet malls that don’t require a hefty drive to the state line. Its mortgage-holder foreclosed on the mall in late September.
Miltary auction at Ritchie Bros. Auctioneers
Humvees, ammo cans, construction equipment, field gear and more is on the auction block Friday and Saturday at Ritchie Bros. Auctioneers. About 10,000 items in all are for sale in what GovPlanet bills as the largest auction of its kind.
Las Vegas residents discuss avoiding holiday scams
Las Vegas residents discuss their donation habits and how they avoid giving money to scam charities during the holiday season. (Bailey Schulz/Las Vegas Review-Journal)
Tesla’s Nevada Gigafactory ahead of economic impact expectations
The Tesla Gigafactory’s economic impact on Nevada has exceeded projections, bringing in more than 7,000 jobs. In 2014, Nevada agreed to give the automotive and energy company $1.3 billion in tax abatements. In return, Tesla promised to meet certain requirements in areas like employment and capital investment. As of June, Tesla has brought in a total of $6.05 billion in capital investment, surpassing the $4.95 billion projection. The original contract gave the company until 2024 to make $3.5 billion in capital investments in Nevada. Derek Armstrong, deputy director of the Governor’s Office of Economic Development.
Land sales near the Las Vegas Raiders stadium
Land around the Las Vegas stadium site has been selling for high prices. A few months before the stadium’s groundbreaking, Global Trust Group acquired a 2.5-acre parcel just north of the stadium site. The property sold for $7.25 million, or $2.9 million an acre. Osprey Real Estate Capital and Huntington Hotel Group acquired a 2-acre industrial site just west of the stadium site in late November. The property sold for $6.5 million, or $3.15 million per acre. That's roughly 12 times the average price of land in the valley this year as tracked by Colliers International.
T-Mobile Tech Experience Truck parks in Toshiba Plaza at T-Mobile Arena
The Tech Experience Truck is a state-of-the-art showroom on wheels, with demonstrations that put connected drones, smart cities, augmented/virtual reality and smart tracking. The exhibit shows new wireless technology – including 5G and the Internet of Things (IoT). (K.M. Cannon/Las Vegas Review-Journal)
Steve Siegel, CEO of the Siegel Group, speaks about helping families and other needy residents
Steve Siegel, CEO of the Siegel Group, speaks about helping families and other needy residents to keep them from teetering off into homelessness. Bizuayehu Tesfaye/Las Vrgas Review-Journal @bizutesfaye
Crowds camp out for Chick-fil-A opening
Dozens of customers camped out 24 hours ahead of the 6 a.m. Thursday opening of the new Chick-fil-A on Rainbow Blvd.
Cheapest listings for sale in Las Vegas
Listed for $39,990, 585 S. Royal Crest Circle, Unit #9 is one of the cheapest homes currently listed for sale in Las Vegas. (Caroline Brehman/Las Vegas Review-Journal)
MGM's sports betting deals
MGM Resorts International signed a sports betting sponsorship agreement with the NBA in July It was the first professional sports league to have official ties with a legal sports betting house. The deal came just two months after the U.S. Supreme Court overturned a law prohibiting sports betting in most states. In October, MGM became the first gaming company to sign a sports betting partnership with the NHL. In November, MGM became the first gaming company to sign a sports betting partnership with the MLB. Financial terms of Tuesday’s deal and earlier partnerships have not been announced.
Terry Miller discusses Convention Center
Project Manager Terry Miller explains the phases of Convention Center construction.
Zappos treats their team members on Cyber Monday
Zappos rolls out a variety of food, drinks and special activities for all team members at their downtown Las Vegas headquarters for Cyber Monday. (K.M. Cannon/Las Vegas Review-Journal)
Team Hybrid at the 2019-Model Motor Trend International Auto Show
Among the companies showing off the 2019 model cars, Team Hybrid shows off its modified cars. Las Vegas resident David David talks about the team, which is in its ninth year exhibiting at the show, and his show car.
Black Friday Shoppers at downtown Summerlin and at the Arsenal
Black Friday shoppers at downtown Summerlin and at the Arsenal. Bizuayehu Tesfaye/Las Vegas Review-Journal @bizutesfYe
Black Friday shopping in Las Vegas
Black Friday sale shopers express their shopping experience. Bizuayehu Tesfaye/Las Vegas Review-Journal @bizutesfaye
Las Vegas Livestock recycling Strip food waste
Las Vegas Livestock collects and recycles food from many Las Vegas Strip companies. (Nicole Raz/Las Vegas Review-Journal)
Black Friday at Fry's
Shoppers line up for deals early on Black Friday at Fry's Electronics on Las Vegas Boulevard South. (Mat Luschek/Las Vegas Review-Journal)
Black Friday shoppers at Best Buy at 5 am
Black Friday shoppers at Best Buy at 5 am on Nov. 23. (Mat Luschek/Las Vegas Review-Journal
Black Friday - 1am Closing Time
Quiet night.
News Headlines
Home Front Page Footer Listing
You May Like

You May Like