Vuzix Corporation (VUZI) is a company I know well and have followed closely for two years, (recommended at closing price of $4.21 in January 2015).

I believe 2017 will be the company’s breakout year in for both revenue generation and share price appreciation.

This article will look at the market for augmented reality, (AR), the leading edge AR products Vuzix is launching, competitors in the AR space, why VUZI shares have underperformed in the last few months, and why shares are now on the verge of a rebound.


At a glance:

Vuzix Corporation (NasdaqCM: VUZI)
Shares outstanding: 19.6 million
Insider & institutional ownership: 33%
Public float: 14.3 million
Shares shorted: 3 million, or ~ 25% of float
Closing Price 2/3/2017: $6.15
Market Capitalization: $120 million
Current Ratio: 2.5

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vuzix logoVuzix Corporation (web site) is a leading supplier of Smart-Glasses, Augmented Reality (AR) and Virtual Reality (VR) technologies and products for the consumer and enterprise markets. The Company’s products include personal display and wearable computing devices that offer users a portable high quality viewing experience, provide solutions for mobility, wearable displays and virtual and augmented reality. Vuzix holds 49 patents and 43 additional patents pending and numerous IP licenses in the Video Eyewear field. The Company has won Consumer Electronics Show (or CES) awards for innovation for the years 2005 to 2017 and several wireless technology innovation awards among others. Founded in 1997, Vuzix has offices in Rochester, NY; Oxford, UK; and Tokyo, Japan.


The Augmented and Virtual Reality Market

Augmented Reality (AR) superimposes graphics, audio and other sensory enhancements over a real-world environment in real time, and blurs the line between what’s real and what’s computer-generated by enhancing what we see, hear, feel and smell. Virtual Reality (VR) in comparison, generates realistic images, sounds and other sensations that replicate a real environment, fully immersing the user in that environment. For a concise overview of the differences between AR and VR technologies, check out “Virtual vs. Augmented Reality” on Augment.com.

The market for AR is expected to catapult to $117.4 billion by 2022, at a CAGR of 75.72% between 2016 and 2022. The future of the VR market is smaller, and is expected to reach $33.9 billion by 2022 at a CAGR of 57.84% between 2016-2022 according to research from MarketsandMarkets.

Tim Merel, a leading AR/VR market expert spoke with Bloomberg in November, and estimates the ability of AR to disrupt smartphones and tablets will reach an inflection point by 2018, and that by the middle of the next decade, AR will actually cannibalize smartphones. I can say that I would not have believed that AR glasses could one day replace my much-loved iPhone 7S…but having recently tried on a working pair of Vuzix Blade 3000 glasses, I think the possibility is very, very real. 

Vuzix has products in the both the VR and AR space, but it’s AR that I believe will be game-changing for VUZI in 2017, based on the Blade 3000 AR glasses the company is about to launch vs. what the competition has to offer.


Vuzix Blade 3000: Wearable Computing That Looks Great

Vuzix Blade 3000 glassesVuzix has a huge competitive advantage as the company rolls out the Blade 3000 series of AR glasses in the second half of this year. That advantage is the Company’s heavily patented, advanced waveguide technology that provides best in market functionality in a set of glasses that are actually stylish and can be worn comfortably all day long. While no firm pricing is available yet, the Vuzix Blade 3000 is expected to begin selling somewhere under $1,000.

I had the pleasure of test driving a working pair of the Vuzix Blade 3000 AR glasses two weeks ago and was thoroughly impressed with the vibrancy and clarity of the display, the best-in-class functionality, and the stylish looks. The glasses were surprisingly light weight and were as comfortable as my regular reading glasses. And in case you’re wondering, Vuzix can easily put your own prescription inserts into the Blade 3000 for a nominal charge.

A tiny projector embedded in the Blade 3000’s side powers a display affixed to the right lens, driven by a quad-core Intel Atom processor.  An internal 64GB storage module (expandable via MicroSD card) files away the Blade 3000’s software and apps, and a Bluetooth 4.1 chip provides connectivity. Myriad sensors, meanwhile, track the wearer’s gaze and location. The Blade 3000 sports a built-in GPS and directional sensors including a gyroscope, accelerometer, and hull sensors.  And a touchpad, replete with haptic feedback in the form of vibration, handles navigation, as does a built-in noise-canceling mic capable of voice recognition.

Blade 3000 Specifications

Optics and Electronics

  • Waveguide based see through optics
  • Cobra II DLP based display
  • Right eye monocular
  • Quad Core ARM CPU
  • 8 Megapixel camera with 1080p video
  • Android 5 OS

Voice control – multilingual

  • Touch pad with gesture
  • Head motion trackers
  • Haptic vibration alerts
  • Remote control app for Android & iOS device

Audio

  • Micro USB ear-phone jack
  • Full BT functionality
  • Noise canceling microphone Battery
  • Internal LiPo rechargeable batteries

Versatile Eyeglass Options Available

  • Prescription inserts
  • Multiple lens color choice
  • Transitions
  • All lenses standard with UV protection

Connectivity

  • MicroSD expansion slot
  • Wi-Fi and BT wireless
  • Micro USB

With this best in class functionality using ultra-thin 2.0 mm glass and good looks, it’s not surprising that the Blade 3000 won four CES 2017 Innovation Awards in the categories of Computer Accessories Product, Gaming Product, Virtual Reality Product, and Wireless Handset Accessories Product.

 

Here’s a look at the 3000 Series at CES 2017:

What do competitors have in the AR space? Nothing that comes close to the Vuzix Blade 3000 in either functionality or style.

Ask yourself, which AR glasses you would choose when comparing the competitors below, and you’ll see why the Blade 3000 will be a game-changer for Vuzix Corporation when deliveries begin this year.

Vuzix Blade 3000 comparisons

 


Large Short Position + Increasing Institutional Participation + Strong Demand Following (delayed) M300 Launch = BUY

Over the last 3 months, VUZI shares have drifted lower on low volume while 25% of the trading float has been shorted.

VUZIX chart

I’ve shorted many stocks myself over the years, and I understand why shorts have jumped on VUZI shares: There was a delay in launching the company’s M300 glasses last year due to design validation testing and manufacturing delays that weighed heavily on the Company’s Q3 results. Such is the nature of cutting edge technology, and VUZI shares have paid the price. However, M300 shipments have now begun, and according to CEO Paul Travers, demand is strong:

“As it currently stands, the 2017 sales demand pipeline is very strong for the M300 and although I cannot share specifics here, I can say that demand is significantly greater than it was for the M100 upon launch. The application and developer ecosystem we have now didn’t exist for the M100 and as a result we’re starting added gates with more orders for long shipments. We are also in discussion with companies with potential needs ranging from hundreds of units, in some case tens of thousands of units.”

CEO Paul Travers from Q3 conference call transcript.

At the same time shorts increased their positions following the Q3 results, institutional participation in the company has actually increased, albeit modestly.

VUZIX institutional shares increasing


Timing IS Everything

Given the current level of support in the low $6 range, this looks like a great time to start of add to a position in Vuzix Corporation for the following reasons:

  • Large short position has taken shares to support levels in low $6 range.  Any substantive, positive news from the Company will cause shorts to exit in order to maximize their profitable positions
  • M300 glasses now in full launch with “very strong demand” that is “significantly stronger than the M100 upon launch” per CEO, Paul Travers. Look for improving financials as a result.
  • M3000 glasses on track for launch this year are something the AR market has been dreaming of- ultra high performance wearable computing that actually looks great
  • Recent institutional participation shows a moderate increase, which may also accelerate now since the reconstituted LD Micro Index from 2/1/2017 also includes VUZI

VUZIX was a strong performer when the news flow was positive in the summer of 2016 and, (unsurprisingly), has underperformed due to the M300 launch delay.

My original recommendation for VUZI was 2 years ago at $4.21 and shares more than doubled to $9.69 in September of last year.

Expect the current downtrend in VUZI shares to reverse when the company is running on all cylinders again, which…. is right…..about now.


See also:

Vuzix January 2017 Investor Presentation
Barron’s: In Vuzix Vs. ODG AR Battle, Edge Goes to Vuzix in Consumer Style
Review: Vuzix Blade 3000 smart glasses hands-on: Spectacles’ less-dorky cousin
Video: Vuzix Flight Test & Drone Show at CES 2017
Video: Vuzix (VUZI) Hits CES 2017 With Strong Balance Sheet and Solid Product Lineup


Best wishes for profitable investing,

Vuzix - gary siggy

 

 

Disclosure: I am long shares of Vuzix Corporation.  I have not been paid in any form by any company or third party for this article.


Shares in Emblem Corp. now trading in U.S under ticker EMMBF


Emblem shares were expected to open between $1.15-$1:50 CA when trading began in Canada on Monday. But due to high demand, shares opened just under $3.00 CAD and rocked up to $3.98 CAD before settling into a trading range between $3.10-$3.40 CAD. Emblem has a float of about 6 million shares, and that float was effectively traded on Monday alone.

Expect that interest to continue as US-based investors can more easily buy Emblem shares now.


One of the most highly anticipated stocks to begin trading in the cannabis space is Emblem Corp.

  • Pre-trading interest from investors in Emblem Corp. was extremely high with shares oversubscribed
  • Emblem shares began trading this week on the TSX Venture Exchange (TSX-V: EMC) and today is quoted in the U.S. market with ticker EMMBF
  • The Emblem Pharmaceutical division is led by John H. Stewart, who launched 11 new products, including OxyContin while he was President and CEO of Purdue Pharma, one of the largest privately held pharmaceutical companies in the world

 


 

Emblem Corp. logoEmblem Corp. (EMMBF) (web site) is a licensed producer of Medical Marijuana in Canada, led by a team of former HealthCare & Pharma Executives who have built & run multi-billion dollar companies and have invested heavily into the company themselves.

 

 

Shares issued and outstanding: 65 million
Approximate float: 6 million
Estimated opening share price range: $1.15-$1.50

 


Booming Medical Marijuana Market

While many sources confirm the hyper-growth of Canada’s medical marijuana industry, the most telling is from the government’s own Health Canada site that reports over 220% growth in registered clients in the Medical Marijuana Program between September of last year to September of 2016.

Data in table below is from Health Canada Market Data: Marijuana for Medical Purposes

Quarter Ending September 30, 2015 Quarter Ending September 30, 2016
Dried Marijuana
Amount sold to clients (kilograms) 1,873 4,733
Amount produced (kilograms) 2,142 5,734
Amount in licensed producers’ inventories at end of quarter (kilograms) 7.312 13,246
Cannabis Oil
Amount sold to clients (kilograms) N/A 2,420
Amount produced (kilograms) 9 3,116
Amount in licensed producers’ inventories at end of quarter (kilograms) 7 3,330
Total number of clients registered at end of quarter 30,537 98,460

Health Canada expects clients enrolled in the Medical Marijuana program to grow at a CAGR of 30% over the next 8 years.


Deloitte Sees Potential $22 Billion Recreational Market

Going beyond medical marijuana, the Canadian government has stated it plans to legalize recreational marijuana by the spring of next year.

Just how significant is this?

In Recreational Marijuana Insights and Opportunities, Deloitte estimates the Canadian recreational marijuana market has an absolute base retail value of $5 billion/year with potential upside to over $22 billion/year when license fees, paraphernalia, tourism revenue, etc. are included.

emblem-cannabis-market-growth-deloitte

 

 


Emblem Corp: The Perfect Management Team and Business Model to Build Shareholder Value 

There are two factors that strongly differentiate Emblem from a multitude of other marijuana stocks available to investors; a management team that’s second to none in the space, and a very compelling business model.

Emblem raised approximately $38 million between the company’s founders, early investors, and investors in brokered and non-brokered private placements. The October private placement at $1.15/share sold out in days and was oversubscribed.

Management

A major reason why Emblem’s October capital raise sold out in a matter of days is summed up in one word: Management.

When you look at the senior management team Emblem has assembled, it’s easy to understand the attraction investors have. No other cannabis stock has a pharmaceutical division headed by someone who launched a drug as big as OxyContin, the most popular opioid of the 21st century. Emblem has that in John H. Stewart, who was President and CEO of Purdue Pharma in 1996 when OxyContin was launched.

 

See: Ex-big pharma executive behind OxyContin sells medical marijuana

 

emblem-cannabis-corp-founders

 

The founders above own a significant percent of the company and understand the importance of share structure. They also exchanged their original shares for Management Performance Escrow shares with a voluntary, 18 month escrow period. Founders, management, and employees have invested ~ $6 million in Emblem Cannabis Corp. to date.


Business Model

Emblem operates three distinct divisions which can create value for each other: Emblem Cannabis (the production division), Emblem Pharmaceutical, and GrowWise Health (marijuana education for patients and physicians).

emblem-cannabis-3-prong-model

I’ll discuss each of the three divisions and the competitive advantages Emblem has in each of them, below.


Production Division: Emblem Cannabis

emblem-cannabis-production

 

Emblem received a marijuana cultivation license from the Canadian government in August 2015 with initial sales beginning in July of this year.

The Company has invested $11 million to date to build a state of the art facility about 60 miles southwest of Toronto, (in Paris, Ontario), which consists of two buildings situated on 4.1 acres of land and includes 14,500 sq. ft. of total cultivation space.

Each grow room is outfitted with dedicated CO2, humidification, & custom HVAC units to provide ideal temperature, humidity, and climate control. With two high quality grow rooms yielding 100% medical grade product, Emblem is testing different methodologies for the Company’s phase 2 expansion to create the ideal balance of quality and quantity.

 

  • Phase 2 expansion is fully funded, and expected to be complete in February, 2017 for a running capacity of 2,100 KG
  • Phase 3 expansion is expected to be completed by Q3 2017 for an additional 9,500 KG of production capacity for a total 11,600KG potential running capacity from all phases
  • Phase 4 expansion (completion expected in 2018) is planned to meet additional demand from the recreational market. Phase 1-4 would have potential capacity of 21,100KG and generate $179.3 million in sales according to the company
  • Most significant for investors is that phases 3 and 4 bring production levels into a range that rivals OrganiGram Holdings (market cap $284 million), Aphria Inc. (market cap $553 million), Mettrum Health (market cap $345 million) and Canopy Growth (market cap $1.2 billion).

-click on graphic for high resolution enlargement

emblem-cannabis-production-capacity-1

 

 

Keep in mind Emblem has just 37 million shares outstanding, so even at $5/share, the market cap would still be far below its peer group.

 


Medical grade marijuana is preferred, and sells at premium prices. Emblem has a wide variety of strains and categories for sale now, with new product launches pending.

 

-click on graphic for high resolution enlargement

emblem-cannabis-strains


emblem-cannabis-oils-picEmblem has invested $1 million into oil production, and sees demand for cannabis oils, especially high CBD oil, rapidly increasing. This higher cost product, (with estimated 90% operating margin), increases the shelf life of medical cannabis and is attractive to consumers who prefer not to inhale smoke and are looking for an easily controlled dosage.

Emblem estimates potential revenue from a single growth room dedicated to high THC and CBD strains that are ideal for extraction to exceed $23 million @ $135/bottle.

 

For a tour of Emblem’s new facilities, see:  “An Inside Look At One Of Canada’s New Licensed Cannabis Producers

 


Emblem Pharmaceutical Division

emblem-pharma-division-logo

 

The second of 3 divisions at Emblem is the Pharmaceutical Division, headed by John H. Stewart.

Stewart, (who has invested about $1 million in Emblem), launched 11 new products, including Biphentin, MS Contin, Zytram and the $2B/year blockbuster, OxyContin.

Beginning in Q2 of next year, Emblem will launch cannabinoid-based medications in strict pharmaceutical dosages in liquid form, gel caps, oral sprays, and inhalers.

 

 

 

Pharmaceutical Division Rational & Opportunities

  • Cannabinoids Have Real Therapeutic Value with Cesamet (THC – Lilly), Marinol (THC – AbbVie) and Sativex (THC & CBD – GW Pharma) approved as prescription drugs by Health Canada
  • Pharma Companies actively developing NCE’s that target the Endocannabinoid System
  • Over 1,000 medical / scientific papers have been published pertaining to the use of cannabinoids
  • Evidence of efficacy in patients with chronic pain, neuropathic pain, muscle spasms, nausea, palliative care and PTSD
  • Canadian Pain Society recommends cannabinoids as third-line treatment for neuropathic pain

Pharmaceutical Division Advanced Dosage Forms

  • Overcome the significant limitations of smoking or vaporization of dried flower
  • Provide for dose-to-dose and lot-to-lot consistency, quality and effects
  • Change the dosage regimen from grams of dried flower per day to mg per dose / mg per day
  • Allow for dosage forms to be targeted to specific purposes- Creating sustained release, and rapid release for pain and sleep respectively
  • Opportunity for dosage form related intellectual property
  • Will greatly increase both patient and prescriber acceptance of cannabinoid therapy

 

While the majority of patients currently taking medical marijuana are seeking relief from pain, anxiety, and sleep disorders, there is exciting evidence that marijuana may prevent cancers from spreading (see Scientists Find Cannabis Compound Stops Metastasis In Aggressive Cancers).

And while scientific research is still needed to confirm some of the health benefits of medical marijuana, there is an abundance of anecdotal and early research results that cannabis has great therapeutic value in as many as 50 different conditions (see 50 Unexpected Benefits of Cannabis).

While many publicly-traded cannabis companies are little more than “growers of a commodity” plant, Emblem fully recognizes the potential for medical marijuana going forward, and has the expertise to capitalize on this market opportunity with an early mover advantage.

John H. Stewart explained:

“Cannabinoids and other components of marijuana have real therapeutic value. Emblem is identifying the marijuana strains with the greatest evidence of benefit in various conditions, cultivating those strains at medical grade and developing advanced dosage forms to provide patients with accurate, consistent, high quality and convenient to use cannabis formulations.”

and in a great interview that I strongly urge investors to read, The Next Big Cannabis IPO“, John Stewart notes that:

“Our high quality cultivation with our pharmaceutical development brings not only the right cannabinoid strain and content to the formulation, but also makes available the formulations best suited for particular therapeutic outcomes.”

Again, having a separate pharmaceutical division headed up by a former President and CEO from big pharma is a huge difference in Emblem vs. marijuana grow companies from an investment perspective.

Consider potential joint ventures and collaborations with global pharmaceutical giants, and you begin to see the potential Emblem offers investors.


Emblem Marijuana Education Division

 emblem-grow-wise-logo

The third division of Emblem Corp. is GrowWise Health, (web site) and is focused on marijuana education to provide a solution for both physicians and patients in the medical marijuana industry. It is a joint venture with White Cedar Pharmacy, one of the largest dispensing pharmacies on Ontario.

While dispensaries sell marijuana from unknown sources directly on site, cannabis support clinics like GrowWise offer support, education, and help on using medical marijuana and choosing a licensed producer.

GrowWise Education Centers operate in medical clinics and receives referrals when patients are prescribed marijuana. Here, nurses counsel patients on safety and strain selection, and assist patients in registering and placing orders with a licensed producer.

GrowWise has partnered with several preferred licenced providers, and is also expected to be another reliable, consistent source of patients for Emblem.

 

GrowWise operates two platforms:

  • Education centres within incumbent medical clinics
    Currently operating in 4 chronic pain clinics & one rehabilitation center, with three additional education centers to be added by end of this year.
  • Stand alone medical cannabis clinics
    First referral-based cannabis clinic opened in November, 2015, have received referrals from nearly 100 different doctors to date, and is opening two more clinics in 2016.

The GrowWise Health/Education Division will be a source of additional, independent revenue flow from new patient acquisition/referrals at other licensed producers, while also feeding into Emblem’s pharmaceutical and marijuana production divisions.

The GrowWise Health division is a strategically astute business model that allows Emblem to draw additional revenue from several preferred provider competitors while driving internal sales at the same time.


Positive Cash Flow Projected by Q4 2017

Due to the quality and strengths of Emblem’s products, management, and business model, Emblem is conservatively projecting to be cash flow positive by Q4 2017. 


The good folks over at Equity.Guru summed up Emblem’s potential very well:

Stewart’s Big Pharma experience is necessary in the Big Cannabis world, now more than ever. With doctors still hedging on prescribing cannabis as medicine (some 98% of doctors in Canada still refuse to prescribe, despite law changes allowing it as a treatment), with large mergers now taking place, such as in last week’s Canopy-Mettrum $430m deal, and with rules changing quickly that will likely see institutional investment in the weed space as it sheds its illegal persona, having a legit pharma boss at the helm of the Emblem Pharma division will make that company an attractive target for bigger fish, and a likely revenue winner.

If you were designing a cannabis company from scratch, I defy anyone to tell me who would be a better pick for a pharma CEO than a man who had been President and CEO of a multi-billion dollar pharma company that exploded in revenues under his leadership and launched 11 new products, including one of the most successful medicines in modern history. In terms of dealing with doctor acceptance, clinical trials, handling regulators, and generating profits, I can’t think of a more qualified option.

And that my friends, is why EMMBF is one to watch.


Best wishes for profitable investing,
Blue Line Protection - gary

 


See also: Emblem Corp. Investor Presentation December, 2016

 An Inside Look At One Of Canada’s New Licensed Cannabis Producers 

Sitewide Terms of Use/Disclosures/Disclaimer

 

ksix-acquires-true-wirelessKSIX Media (KSIX) announced this morning the signing of a definitive agreement to acquire True Wireless (web site), an eligible telecommunications carrier providing discounted and subsidized cell phone service to those who qualify.

We first alerted this deal when KSIX was trading under .20/share in October, but since then True Wireless has increased the estimate on EBITDA from $2.9 million to $3.1 million and now there is a definitive agreement in place.

The final share count following the acquisition is expected to be about 80 million shares. With telecoms trading at 20-30x EBITDA, that puts a target market cap for KSIX much, much higher than it presently trades at. With a post-acquisition estimate of 80 million shares the KSIX market cap at .42/share = 33.6 million. With EBITDA of $3.1 million x (low end of range) 20 multiple, KSIX should ultimately rise to a $62 million market cap… on the conservative end of the scale.

Moreover, the 2016 EBITDA of $3.1 million could ramp quite rapidly next year with the marketing efforts of the KSIX media team. The CEO of True Wireless, Brian Cox, explained that KSIX Media “helped increase revenues by 49%” in the previous two quarters. So it’s not a stretch to expect the combined companies and management to continue to accelerate that growth. There’s a strong business and marketing synergy here, and that’s what you want to see in an acquisition of this sort.


NBEV Backer and Turnaround Director now Quarterbacking KSIX/True Wireless Deal

Our best performing pick of 2016 has been New Age Beverage Corp (NBEV). This was a pick made in April when the stock was just .40/share. As I write this, NBEV shares are trading over $5/share, for a gain exceeding 1,000%.

Why does this matter?

It matters because the person who earlier this year took a struggling American Brewing Company, tweaked the model and got the right team in place to run the company was an investor by the name of Kevin Fickle at Nuwa Ventures. Investors should know that Kevin is also the man behind the scenes with the KSIX acquisition of True Wireless.

If there’s one thing I’ve learned as an investor, it’s that having great management alone isn’t enough in acquisitions. The unseen backers behind the deals- the investors who help get the right people in place (as Kevin Fickle did at American Brewing over 1,000% ago), the people that offer financial backing and make the right introductions to new sources of capital and human resources are also key. When you find one that has a proven track record of bringing in the right people and capital to drive shareholder value, you follow the money.


KSIX in the .40s represents a very good risk/reward play going into 2017. Very few know about it yet, and that’s the best time to buy.  Even with this morning’s news shares have traded just 40,000 shares so far…but don’t expect that to last- not many knew about NBEV at .40/share either. Trading will likely be choppy and I’m expecting some wild swings along the way, but also expect shares to settle considerably higher in 2017 as this acquisition rolls out.

I’ll be following the progress of KSIX in the coming weeks and months, and am long the stock.


Best wishes!

Blue Line Protection - gary

 

 

I have not been compensated for this article. I am long shares of KSIX.

See also Terms of Use/Disclosures/Disclaimers

 

Emblem Corp (EMC.V) to begin trading Monday, December 12.

 

Emblem Corp. logo

Emblem updated investors Friday with the statement:

Further to its press release dated December 7, 2016, the Company announces that it expects to close today its previously announced non-brokered private placement of units for gross proceeds of $787,500 (the “Private Placement”). Each unit will be comprised of one common share of the Company (a “Common Share”) and one-half of one Common Share purchase warrant, with each whole warrant entitling the holder thereof to acquire one Common Share for a period of thirty-six months from the date of issuance at an exercise price of $1.75 per Common Share. Closing of the Private Placement remains subject to final approval of the TSX Venture Exchange (the “Exchange”) and other standard closing conditions.

From a press release last week I think the Company sums up the opportunity for investors very clearly, stating:

Emblem’s unique pharmaceutical-like cannabinoid formulation approach is focused on optimizing strain selection and greatly expanding acceptance of medical marijuana therapy by both patients and healthcare professionals. It’s always been known that Cannabinoids have real therapeutic value, as evidenced by Cesamet, Marinol and Sativex all having been approved as prescription drugs. The active components in cannabis are extracted, purified, and incorporated into advanced dosage formulations.


And in case you missed it in our earlier article on Emblem (which you can read here),there’s a great Q&A by the BBC with the President of Emblem’s Pharmaceutical division, John H. Stewart you should read: Ex-big pharma executive behind OxyContin sells medical marijuana.


I’ll say again that I’m a buyer of Emblem on Monday. For those who don’t know me yet, I recognized the opportunity of 3D printing stocks and bought them heavily in 2012.  I then launched 3DPrintingStocks.com in the spring of 2013…well in advance of the enormous parabolic moves they made in 2014-early 2015. I believe we are in the first inning of a 12-24 month move in the cannabis space, and I think Emblem has the right management, the right business model, tight share structure, (6 million float), and support from founders/early investors to make the company a top tier cannabis stock going forward.


dariohealth-logo

DarioHealth (DRIO), a pioneer in the mobile health space with a focus on diabetes management, announced the company had over 4,000 new sign ups from the U.S. alone during November’s Diabetes awareness month. I checked with the company for clarification and learned that “sign ups” means people with the Dario Smart Glucose Meter in the hands of end users. The device comes with 50 strips and data history has shown “that approx. 75% of those turn into strip buyers in 30-45 days after.”

Doing the math, average strip sales/customer is $300/year. 75% of 4,000 = 3,000 x $300 = estimate for $900,000 in new annual sales originating from the U.S. market alone from the month of November. To put this in perspective, for the entire Q3, DarioHealth sold about 5,500 Smart Glucose Meters in the U.S (see Q3 press release), and the company turned a (modest) gross profit.

In September DarioHealth also launched an online store in Canada in collaboration with A&D Medical, a global leader in connected health and biometric measurement devices and services, and Bayshore Specialty Rx Ltd.’s online pharmacy, Diabetes Express, and the Company’s Smart Glucose System is for sale in major pharmacies in Canada such as London Drugs (see Dario™ diabetes management tool turns your mobile device into a glucose monitor and more— now available in Canada).

As a result of fast growth in the U.S. market, the Company’s September launch in Canada, (plus an Australian launch in July), it’s clear that Q4 should be another record for the company. There are an estimated 415 million people worldwide living with diabetes according to the International Diabetes Federation, and DRIO is well-positioned to realize significant growth in helping people better manage their diabetes. In fact, they’re doing just that already.

Read more about DarioHealth in my initial article. Shares have gained 13% since then, and have a long way to go as more launches of  Dario’s Smart Glucose System take place around the globe, and what I think will be a very, very strong Q4 is reported.


Lastly, congratulations again to our subscribers in New Age Beverage Cop. (NBEV)!

Shares closed at a new high Friday of $4.17, a gain of 940% from our recommendation at .40 in April.

As I wrote back in April, the company had the following ingredients to drive shareholder value:

  • a laser-like focus dedicated to an unconsolidated, yet booming market
  • the right product that has strong competitive advantages in the market
  • a balance sheet that allows the company to focus on the new, or previously underutilized direction
  • the right management with the right connections and experience in the space to make the decisions that will drive success

And NBEV “remains one to watch” for the same reasons.

I’m pointing out NBEV here because both Emblem Corp. (EMC.V) and DarioHealth (DRIO) have within their respective management teams, business models, and market opportunities, the same ingredients for success going forward into 2017.


 

Best wishes for profitable investing,

Blue Line Protection - gary

 

 

site terms of use/disclosures and disclaimers

Canadian marijuana stocks have been on fire recently, and one of the most highly anticipated stocks to begin trading in the space is Emblem Corp.

  • Pre-trading interest from investors in Emblem Corp. has been extremely high with shares oversubscribed
  • Emblem shares begin trading this week on the TSX Venture Exchange (TSX-V: EMC), with an OTC listing in the U.S. pending
  • U.S.-based investors can buy shares of Emblem on the TSX Venture Exchange with major online brokers. Buying shares prior to the initiation of trading on the U.S. OTC market in the coming weeks could prove to be extremely profitable, as a large increase in demand for a float of just 6 million shares will be felt when trading begins on the OTC market in the U.S.
  • The Emblem Pharmaceutical division is led by John H. Stewart, who launched 11 new products, including OxyContin while he was President and CEO of Purdue Pharma, one of the largest privately held pharmaceutical companies in the world

 


 

Emblem Corp. logoEmblem Corp. (TSX-V: EMC) (web site) is a licensed producer of Medical Marijuana in Canada, led by a team of former HealthCare & Pharma Executives who have built & run multi-billion dollar companies and have invested heavily into the company themselves.

 

 

Shares issued and outstanding: 65 million
Approximate float: 6 million
Estimated opening share price range: $1.15-$1.50

 


Booming Medical Marijuana Market

While many sources confirm the hyper-growth of Canada’s medical marijuana industry, the most telling is from the government’s own Health Canada site that reports over 220% growth in registered clients in the Medical Marijuana Program between September of last year to September of 2016.

Data in table below is from Health Canada Market Data: Marijuana for Medical Purposes

Quarter Ending September 30, 2015 Quarter Ending September 30, 2016
Dried Marijuana
Amount sold to clients (kilograms) 1,873 4,733
Amount produced (kilograms) 2,142 5,734
Amount in licensed producers’ inventories at end of quarter (kilograms) 7.312 13,246
Cannabis Oil
Amount sold to clients (kilograms) N/A 2,420
Amount produced (kilograms) 9 3,116
Amount in licensed producers’ inventories at end of quarter (kilograms) 7 3,330
Total number of clients registered at end of quarter 30,537 98,460

Health Canada expects clients enrolled in the Medical Marijuana program to grow at a CAGR of 30% over the next 8 years.


Deloitte Sees Potential $22 Billion Recreational Market

Going beyond medical marijuana, the Canadian government has stated it plans to legalize recreational marijuana by the spring of next year.

Just how significant is this?

In Recreational Marijuana Insights and Opportunities, Deloitte estimates the Canadian recreational marijuana market has an absolute base retail value of $5 billion/year with potential upside to over $22 billion/year when license fees, paraphernalia, tourism revenue, etc. are included.

emblem-cannabis-market-growth-deloitte

 

 


Emblem Corp: The Perfect Management Team and Business Model to Build Shareholder Value 

There are two factors that strongly differentiate Emblem from a multitude of other marijuana stocks available to investors; a management team that’s second to none in the space, and a very compelling business model.

Emblem raised approximately $38 million between the company’s founders, early investors, and investors in brokered and non-brokered private placements. The October private placement at $1.15/share sold out in days and was oversubscribed.

Management

A major reason why Emblem’s October capital raise sold out in a matter of days is summed up in one word: Management.

When you look at the senior management team Emblem has assembled, it’s easy to understand the attraction investors have. No other cannabis stock has a pharmaceutical division headed by someone who launched a drug as big as OxyContin, the most popular opioid of the 21st century. Emblem has that in John H. Stewart, who was President and CEO of Purdue Pharma in 1996 when OxyContin was launched.

 

See: Ex-big pharma executive behind OxyContin sells medical marijuana

 

emblem-cannabis-corp-founders

 

The founders above own a significant percent of the company and understand the importance of share structure. They also exchanged their original shares for Management Performance Escrow shares with a voluntary, 18 month escrow period. Founders, management, and employees have invested ~ $6 million in Emblem Cannabis Corp. to date.


Business Model

Emblem operates three distinct divisions which can create value for each other: Emblem Cannabis (the production division), Emblem Pharmaceutical, and GrowWise Health (marijuana education for patients and physicians).

emblem-cannabis-3-prong-model

I’ll discuss each of the three divisions and the competitive advantages Emblem has in each of them, below.


Production Division: Emblem Cannabis

emblem-cannabis-production

 

Emblem received a marijuana cultivation license from the Canadian government in August 2015 with initial sales beginning in July of this year.

The Company has invested $11 million to date to build a state of the art facility about 60 miles southwest of Toronto, (in Paris, Ontario), which consists of two buildings situated on 4.1 acres of land and includes 14,500 sq. ft. of total cultivation space.

Each grow room is outfitted with dedicated CO2, humidification, & custom HVAC units to provide ideal temperature, humidity, and climate control. With two high quality grow rooms yielding 100% medical grade product, Emblem is testing different methodologies for the Company’s phase 2 expansion to create the ideal balance of quality and quantity.

 

  • Phase 2 expansion is fully funded, and expected to be complete in February, 2017 for a running capacity of 2,100 KG
  • Phase 3 expansion is expected to be completed by Q3 2017 for an additional 9,500 KG of production capacity for a total 11,600KG potential running capacity from all phases
  • Phase 4 expansion (completion expected in 2018) is planned to meet additional demand from the recreational market. Phase 1-4 would have potential capacity of 21,100KG and generate $179.3 million in sales according to the company
  • Most significant for investors is that phases 3 and 4 bring production levels into a range that rivals OrganiGram Holdings (market cap $284 million), Aphria Inc. (market cap $553 million), Mettrum Health (market cap $345 million) and Canopy Growth (market cap $1.2 billion).

-click on graphic for high resolution enlargement

emblem-cannabis-production-capacity-1

 

 

Keep in mind Emblem has just 37 million shares outstanding, so even at $5/share, the market cap would still be far below its peer group.

 


Medical grade marijuana is preferred, and sells at premium prices. Emblem has a wide variety of strains and categories for sale now, with new product launches pending.

 

-click on graphic for high resolution enlargement

emblem-cannabis-strains


emblem-cannabis-oils-picEmblem has invested $1 million into oil production, and sees demand for cannabis oils, especially high CBD oil, rapidly increasing. This higher cost product, (with estimated 90% operating margin), increases the shelf life of medical cannabis and is attractive to consumers who prefer not to inhale smoke and are looking for an easily controlled dosage.

Emblem estimates potential revenue from a single growth room dedicated to high THC and CBD strains that are ideal for extraction to exceed $23 million @ $135/bottle.

 

For a tour of Emblem’s new facilities, see:  “An Inside Look At One Of Canada’s New Licensed Cannabis Producers

 


Emblem Pharmaceutical Division

emblem-pharma-division-logo

 

The second of 3 divisions at Emblem is the Pharmaceutical Division, headed by John H. Stewart.

Stewart, (who has invested about $1 million in Emblem), launched 11 new products, including Biphentin, MS Contin, Zytram and the $2B/year blockbuster, OxyContin.

Beginning in Q2 of next year, Emblem will launch cannabinoid-based medications in strict pharmaceutical dosages in liquid form, gel caps, oral sprays, and inhalers.

 

 

 

Pharmaceutical Division Rational & Opportunities

  • Cannabinoids Have Real Therapeutic Value with Cesamet (THC – Lilly), Marinol (THC – AbbVie) and Sativex (THC & CBD – GW Pharma) approved as prescription drugs by Health Canada
  • Pharma Companies actively developing NCE’s that target the Endocannabinoid System
  • Over 1,000 medical / scientific papers have been published pertaining to the use of cannabinoids
  • Evidence of efficacy in patients with chronic pain, neuropathic pain, muscle spasms, nausea, palliative care and PTSD
  • Canadian Pain Society recommends cannabinoids as third-line treatment for neuropathic pain

Pharmaceutical Division Advanced Dosage Forms

  • Overcome the significant limitations of smoking or vaporization of dried flower
  • Provide for dose-to-dose and lot-to-lot consistency, quality and effects
  • Change the dosage regimen from grams of dried flower per day to mg per dose / mg per day
  • Allow for dosage forms to be targeted to specific purposes- Creating sustained release, and rapid release for pain and sleep respectively
  • Opportunity for dosage form related intellectual property
  • Will greatly increase both patient and prescriber acceptance of cannabinoid therapy

 

While the majority of patients currently taking medical marijuana are seeking relief from pain, anxiety, and sleep disorders, there is exciting evidence that marijuana may prevent cancers from spreading (see Scientists Find Cannabis Compound Stops Metastasis In Aggressive Cancers).

And while scientific research is still needed to confirm some of the health benefits of medical marijuana, there is an abundance of anecdotal and early research results that cannabis has great therapeutic value in as many as 50 different conditions (see 50 Unexpected Benefits of Cannabis).

While many publicly-traded cannabis companies are little more than “growers of a commodity” plant, Emblem fully recognizes the potential for medical marijuana going forward, and has the expertise to capitalize on this market opportunity with an early mover advantage.

John H. Stewart explained:

“Cannabinoids and other components of marijuana have real therapeutic value. Emblem is identifying the marijuana strains with the greatest evidence of benefit in various conditions, cultivating those strains at medical grade and developing advanced dosage forms to provide patients with accurate, consistent, high quality and convenient to use cannabis formulations.”

and in a great interview that I strongly urge investors to read, The Next Big Cannabis IPO“, John Stewart notes that:

“Our high quality cultivation with our pharmaceutical development brings not only the right cannabinoid strain and content to the formulation, but also makes available the formulations best suited for particular therapeutic outcomes.”

Again, having a separate pharmaceutical division headed up by a former President and CEO from big pharma is a huge difference in Emblem vs. marijuana grow companies from an investment perspective.

Consider potential joint ventures and collaborations with global pharmaceutical giants, and you begin to see the potential Emblem offers investors.


Emblem Marijuana Education Division

 emblem-grow-wise-logo

The third division of Emblem Corp. is GrowWise Health, (web site) and is focused on marijuana education to provide a solution for both physicians and patients in the medical marijuana industry. It is a joint venture with White Cedar Pharmacy, one of the largest dispensing pharmacies on Ontario.

While dispensaries sell marijuana from unknown sources directly on site, cannabis support clinics like GrowWise offer support, education, and help on using medical marijuana and choosing a licensed producer.

GrowWise Education Centers operate in medical clinics and receives referrals when patients are prescribed marijuana. Here, nurses counsel patients on safety and strain selection, and assist patients in registering and placing orders with a licensed producer.

GrowWise has partnered with several preferred licenced providers, and is also expected to be another reliable, consistent source of patients for Emblem.

 

GrowWise operates two platforms:

  • Education centres within incumbent medical clinics
    Currently operating in 4 chronic pain clinics & one rehabilitation center, with three additional education centers to be added by end of this year.
  • Stand alone medical cannabis clinics
    First referral-based cannabis clinic opened in November, 2015, have received referrals from nearly 100 different doctors to date, and is opening two more clinics in 2016.

The GrowWise Health/Education Division will be a source of additional, independent revenue flow from new patient acquisition/referrals at other licensed producers, while also feeding into Emblem’s pharmaceutical and marijuana production divisions.

The GrowWise Health division is a strategically astute business model that allows Emblem to draw additional revenue from several preferred provider competitors while driving internal sales at the same time.


Positive Cash Flow Projected by Q4 2017

Due to the quality and strengths of Emblem’s products, management, and business model, Emblem is conservatively projecting to be cash flow positive by Q4 2017. 

 


Potential Answer to Skyrocketing Opioid Abuse

The revenue projections above do not include the potential revenue from collaboration or JV with government or big pharma in curbing opioid abuse. As we know, high levels of opioid abuse is a growing problem in the U.S. and Canada. There may be a light shining in the darkness of the present opioid abuse tunnel however. The American Journal of Public Health recently published a study that revealed opioid use was reduced in states with legalized medical marijuana (see Study: Opioid Use Decreases in States that Legalize Medical Marijuana). Additionally, Massachusetts has reported success in reducing opioid abuse by utilizing medical marijuana, (see Opioid Addiction Being Treated With Medical Marijuana in Massachusetts)

There is no cannabis stock with a management team as proficient in opioid analgesics as Emblem, and I think this is something both retail and institutional investors will come to realize in the near term.


Expect Surge of Interest & Volume When Shares Begin Trading on U.S. OTC Market

As mentioned earlier, U.S.-based investors can easily buy shares of Emblem Corp. via major online brokers. In most cases the ticker will be EMC.V or EMC:CA. Buying shares early, and prior to the initiation of trading on the U.S. OTC market in the coming weeks could prove to be extremely profitable. There will be an increase in demand for a float of just 6 million shares when trading begins in the U.S.

I’ll be a buyer of EMC.V shares tomorrow and look forward to updating subscribers on the company in the weeks and months ahead!


Best wishes for profitable investing,
Blue Line Protection - gary

 


See also: Emblem Corp. Investor Presentation December, 2016

 An Inside Look At One Of Canada’s New Licensed Cannabis Producers 

Sitewide Terms of Use/Disclosures/Disclaimer

 

DRIO stock

 

Nasdaq listed DarioHealth Corp. (DRIO) is pioneering the future of disease management and mobile health by providing consumers with laboratory-testing capabilities using smart phones and other mobile devices. Dario’s™ smart diabetes management solution is a platform for diabetes management that combines the Dario™ Blood Glucose Monitoring System all-in-one blood glucose meter, native smart phone app, website portal and a wide variety of treatment tools to support more proactive and better informed decisions by users living with diabetes, their doctors and healthcare systems.


In news today, (DarioHealth Ends a Successful Diabetes Awareness Month) DarioHealth Corp. (DRIO) announced the company added over 4,000 new sign-ups using their cost-effective, direct-to-consumer model.

 

Erez Raphael, DarioHealth’s Chief Executive Officer stated:

“During Diabetes Awareness Month, we welcomed thousands of new registrants. In the U.S. alone, we had over 4,000 new sign-ups. Our primary goal is to give members of our DarioHealth community the best user experience possible to deal with their diabetes. It is extremely encouraging and inspiring when we receive positive feedback. This is the ultimate vote of confidence and the results from Diabetes Awareness Month echo this. We continue to build on our success as we head towards 2017 and beyond.”

 

Leveraging the razor/razor blade model, the average consumer will use $300 of strips at 75% grow margins…part of the reason why the company turned a gross profit in Q3…and why adding 4,000 sign-ups for the month of November in the U.S. alone is significant.

Sales grew 166% last quarter, and it looks as management is delivering on stated guidance for “market penetration and user growth to accelerate in the fourth quarter”


For more on DRIO read our initial article: DarioHealth: Digital Disease Management Pioneer Experiencing Dramatic Growth

DarioHealth BUY Recommendation w $12 price target from Rodman and Renshaw

DarioHealth Corp. November 2016 Investor Presentation


DRIO stock - gary

 

 

See Terms of Use/Disclosures/Disclaimer

First, congratulations to our many subscribers in NBEV!

NBEV hit $3.60 this week…an 800% gain from our April recommendation at .40/share when the company was just beginning to enter the functional beverage market.


 

Our latest pick, DarioHealth (DRIO) has gained about 9% since our initial report.

For the moment, DRIO is a relatively unknown entity with a 50 day average volume of 35,000 shares trading, but look for more volume and investor awareness to come- and soon. The Mobile Health (mHealth) industry is just beginning to gain traction with investors, and DRIO is a true pioneer in the space.

Relative to other mHealth plays such as Fitbit (NYSE: FIT) at a $2.2 billion market cap, or 23X EPS, and MyFitnessPal, acquired by Under Armour (NYSE:UA) for $475 million, DRIO with just an $18 million market cap. is ridiculously undervalued, especially given the company grew sales by 166% last quarter and turned a gross profit. Fundamentals matter and they’re strong at DarioHealth (see Q3 Highlights).

Shares of DarioHealth closed on Friday at $3.30 on higher than average volume, and remain a long way from the $12/share price target Rodman and Renshaw has on the stock (see report).

Note that the 50 dma for DRIO shares is $3.29 so a continuation above that level on higher than average volume will be very bullish!


Get Ready for Emblem Trading to Start Friday, December 9th!

Emblem Corp. logo

 

Emblem Cannabis Corporation (TSX-V: EMC) is a licensed producer of Medical Marijuana in Canada, led by a team of former HealthCare & Pharma Executives who have built & run multi-billion dollar companies and have invested heavily into the company themselves.

 


Emblem Cannabis will trade on the TSX-V under the symbol EMC

Buying stocks listed on the Toronto Stock Exchange can be done using any major online broker in the U.S.

If you’ve never traded on an exchange outside of the U.S. before, you may need to get approval from your broker first. This is a simple matter of answering a few questions online or by speaking with your broker to gain access to the Toronto Stock Exchange.

Shares issued and outstanding: 37.3 million
Approximate float: 6 million
Estimated opening share price range: $1.00-$1.50
Web site: Emblemcorp.com


We will have a full report on Emblem (TSX-V: EMC) out on Thursday so you can get a jump on the market.

For now, know this about Emblem:

  • The head of Emblem’s pharmaceutical division, John Stewart, launched the blockbuster drug, OxyContin when he was President and CEO of Purdue Pharma- see article Ex-big pharma executive behind OxyContin sells medical marijuana
  • Emblem recently completed a $23.7 million offering that sold out in a matter of days and was oversubscribed
  • Emblem (EMC) is now funded to begin phase 3 expansion, with plans to expand to over 12,000KG capacity and sales of $136 million at full production
  • Trading on Friday is expected to open between $1-$1.50/share. Trading with a symbol in the US is planned in the coming weeks
  • Buying the Canadian-listed EMC shares through your U.S. online broker could prove to be a very wise move! Once trading begins with a U.S.-based ticker in a few weeks, there will be stronger demand for a float of just 6 million shares
  • Emblem’s Founders and Management have built and managed multi-billion dollar companies in the health care and pharmaceutical industries, are heavily invested in the company themselves

In short, Emblem has all the ingredients to be a top tier cannabis stock in the near term as you’ll see in our report on Thursday!


Blue Line Protection - gary

 

 

 


 

dariohealth-logo

Nasdaq listed DarioHealth Corp. (DRIO) is pioneering the future of disease management by providing consumers with laboratory-testing capabilities using smart phones and other mobile devices.

The company’s flagship product, the Dario Smart Diabetes Management Solution, is a patented, mobile, real-time, cloud-based, diabetes management solution based on a multi-feature software application combined with Dario Smart Meter, a pocket-sized, blood glucose monitoring device.

Leveraging the razor/razor blade model, the average consumer will use $300 of strips at 75% grow margins…part of the reason why the company turned a gross profit in Q3.

In Q3 2016, sales grew 166%, the company recorded a gross profit, and management expects “market penetration and user growth to accelerate in the fourth quarter.”

DarioHealth Corp. has built a digital disease management platform that is used in 7 different countries and growing, is cost effective for consumers, is readily scalable at minimal additional cost, and which can be expanded into other disease management areas beyond diabetes.


 

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Share Information

Shares Outstanding: 5.7 million
Insider ownership: ~40%
Float:
3.9 million
Closing Price 11/28/2016: $3.02
Market Capitalization: $17.3 million


The Diabetes Management Market

Diabetes is the 7th leading cause of death in the United States according to the Centers for Disease Control. Moreover, it greatly increases the risk for heart disease, end-stage renal disease, blindness, amputation, and complications during pregnancy.

It is a chronic medical condition that has increased in its numbers at a faster pace than most other chronic conditions. In 2015, the International Diabetes Federation estimated that more than 415 million people had been diagnosed with the disease, and that number is expected to balloon to 642 million by 2040.

The importance of carefully managing diabetes cannot be overstated. In a recent study by the National Institutes of Health, people with type 2 diabetes who intensively managed their blood sugar levels were found to have cut their risk of diabetic retinopathy in half. Multiple studies have shown that well managed blood sugar levels in diabetics dramatically reduces risk of complications including heart and blood vessel disease, nerve damage, and kidney disease as well.

Mayo Clinic puts it simply and directly:

“Controlling your blood sugar levels can help prevent these complications.”

And this is where DarioHealth Corp. comes in. With 12% of all global health expenditures spent on diabetes, having a real-time diabetes management solution that is practical and user-friendly while reducing risk of costly and life-threatening complications represents an urgently needed paradigm shift in the management of the disease.


Moving the Market from “Monitoring” to “Management”

Investors should understand that DarioHealth Corp. is not simply a diabetes monitoring device company. Dario is a pioneer in effective disease management solutions, and diabetes is the first, “low hanging fruit” the company is addressing.

The Dario App provides:

  • Real-time, easy-to-access information
  • Results are automatically logged and synced in the cloud for physician access (no need to write in paper log books)
  • Data insights, analysis, and pattern recognition so users can easily understand why their personal blood glucose levels change and what changes them
  • Actionable alerts and reminders
  • Insulin dose tracking
  • Log of carbs and calories
  • Database showing carbohydrate counts of half a million foods
  • Users can even set extreme hypoglycemic result alerts to text message family member(s) with GPS tracking

DarioHealth also intends to increase penetration in both the direct to consumer market and to other businesses by offering diabetes management coaching services in the future. The company plans to reduce medical complications of employees with diabetes (and improve clinical outcomes, reduce sick time, reduce health care costs) by using a team of nurses and other health care professionals that will provide diabetes management coaching services.

The video below gives an overview of the DarioHealth Smart Diabetes Management System in action.

 

 

The DarioHealth Smart Diabetes Management System includes a sleek, accurate, all-in-one Smart Meter combined with a robust, real-time mobile app that allows users to record their data: blood glucose measurements, carbs & insulin intake, and physical activity. Users can view, analyze, list and compare all of this valuable information and share it with family and medical staff.

 


DarioHealth is the only diabetes management system that includes all of the features below:

 

dariohealth-features

 


Innovative B2C Sales Model = High Margins and Rapid Sales Growth

Beyond the technological innovation in disease management, DarioHealth Corp. has an innovative approach to sales. The company is using a direct business to consumer sales approach with a strong presence on social media. With numerous ads like this (Special Offer for Diabetes Awareness Month: FREE METER), DarioHealth is creating demand directly from the consumer, skipping the middlemen, and generating high margins.

Razor/Razor Blade Business Model

In the diabetes lifestyle management revenue stream, the average user will use $300 worth of strips per year at 75% gross margin.

The model is working. 

DarioHealth Corp. launched the B2C sales model in the UK in Q1 of last year, then expanded sales to Australia, Canada, and Italy within 12 months. The company entered the U.S market in March of this year.

Sales growth is in a strong uptrend as seen in the chart below:

dariohealth-revenue-growth

In Q3 2016, sales increased by 166% vs. the year ago period. Other highlights from a very impressive quarter include:

  • Record revenues of $728,000
  • Gross profit of $76,000 in the third quarter
  • 75% of quarterly revenues derived from test strips and other consumables
  • More than 5,500 Dario all-in-one smart glucose meter devices were purchased directly by U.S. customers during the third quarter; globally about 8,500 were sold during the quarter
  • About 70% of strips sales in the U.S. during the quarter were under the subscription plan
  • Direct-to-consumer model launched in Australia and in Canada
  • Ramped up inventory to $1.1 million in order to support further market penetration

DarioHealth Corp. CEO, Erez Raphael, stated:

“During the third quarter, we continued to advance our direct-to-consumer strategy in the U.S., increased device sales, delivered significant monthly user growth and established a predictable stream of high margin recurring subscription revenues from new customers. We are encouraged by the positive engagement we are achieving with new users and expect market penetration and user growth to accelerate in the fourth quarter. Our active community of users and subscribers is growing every day which is bringing positive changes to people with diabetes, and disrupting the digital, mHealth and lifestyle market.”

and

“We have the right product and the right strategy to succeed in these efforts and look forward to the opportunities ahead of us. The predictable nature of these subscription revenues will provide us greater visibility in 2017 and serve as the foundation for our long-term growth.”

Sound fiscal management has improved the balance sheet over the prior year, and DarioHealth now has cash of ~ $1.50/share on hand (see 10-Q).

$ in thousands Period Ending 9/30/16 Period Ending 12/31/15
Cash $3,339 $2,671
Total Assets $6,696 $5,077
Total Liabilities $2,336 $6,657
Shareholders’ Equity (deficit) $4,360 $(1,580)

Growth in 2017 and Beyond

At present, DarioHealth has only has FDA approval for the Diabetes Management System on Apple devices in the U.S. The company has submitted the Android version of the system to the FDA and expects approval in Q1 or early Q2 of next year. There are approximately 107 million users of android devices in the U.S., so this is a noteworthy market for expansion. Additionally, DarioHealth will be offering more user applications and expanding into new geographic territories in the coming year.

Ultimately, DarioHealth intends to dramatically ramp revenue by expanding the company’s diabetes management solution beyond individual consumers to include businesses, by offering a cost effective mobile health solution for employees with diabetes. DarioHealth plans to reduce medical complications of employees with diabetes (and improve clinical outcomes, reduce sick time, reduce health care costs) by using a team of nurses and other health care professionals to provide diabetes management coaching services. This is a huge, untapped market for Dario to penetrate with an early mover advantage.


Valuation

DarioHealth is a pioneer in the digital health space, addressing a global market of > 400 million diabetics with patented technology that can help them better manage their disease and reduce expensive and life-threatening complications in a cost-effective manner.

With sales just beginning to dramatically increase following last year’s launch and the enormous market the Diabetes Management System addresses, the current low market capitalization of DarioHealth ($17 million) is not likely to last. To date, the company has been focused on the successful launch of the system itself, including FDA and other regulatory hurdles, obtaining patent protections, and regularly upgrading the software based on user feedback. During my conversation with management earlier this week it was clear the company intends to begin doing much more in terms of investor awareness and investor relations, including taking steps to increase institutional awareness and participation in the company.

Given the overall market growth, the innovative, high-growth user platform, the business model, marketing capabilities, and new market opportunities, DarioHealth is likely to deliver a “hockey-stick growth” chart in the year ahead.

Rodman and Renshaw has a $12 price target on DRIO shares, using a net present value (NPV) model, and assuming just 6.6% diabetes market penetration and $400/year sales/user (includes hardware, strips, licensing, etc.)

DarioHealth - rodman valuation

Joseph Gunnar & Co. uses a price/sales model peer group comparison, and has an $8 price target on DRIO Shares. This is 4.5x 2018 revenue estimates and multiple is in line with the peer group average.

Relative to other digital health data solutions, both retail and institutional investors should love DRIO shares here at a $17 million market cap. Consider Fitbit (NYSE: FIT) at a $2.2 billion market cap, or 23X EPS, and MyFitnessPal, acquired by Under Armour (NYSE:UA) for $475 million.

Fundamentals matter, and we think DarioHealth (DRIO) shares will have a very strong showing in 2017 as the company rapidly expands users, revenues, and is introduced to a larger investor base.


DarioHealth - gary siggy

 

 

Supplemental: DarioHealth November 2016 Investor Presentation

Rodman and Renshaw Report: DarioHealth BUY $12 PT

Joseph Gunnar & Co. Report: DarioHealth BUY $8 PT


See: Terms of use/disclosures/disclaimer

Blue Line Protection Group logoBlue Line Protection Group (web site) is a leading security and risk mitigation solutions provider for retail businesses and financial institutions serving the legal cannabis industry, is now providing a complete compliance, transportation and cash processing solution for banks and credit unions looking to enter the cannabis industry.


BLPG Shares Record Big Gains on Record Volume

Last week, shares in Blue Line Protection Group (BLPG) rose from .035 to an intraday high of .09 on record volume.

Blue Line Protection

 

Shares pulled back on profit-taking on Thursday and Friday, making a nice entry point here.

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Demand for Banking Services from Legal Cannabis Industry Increasing

Some might believe that the expansion of legal of cannabis use in more states would reduce demand for Blue Line Protection Group’s legal cannabis banking services.

However, according to this article in Bloomberg last week, the opposite is happening. While nine more states will vote tomorrow on whether to legalize some aspect of marijuana use, banks willing to provide services to cannabis companies are still hard to find.

See: See America’s Legal Pot Economy Is Forced Underground


For those new BLPG, we recommended it here at .04/share:

see: Banking The Cannabis Industry: A Groundbreaking Moment Comes Into Focus (August 1st)

and

Video Interview with CEO of Blue Line Protection Group (BLPG) (August 9th)

and

First-Mover Advantage and Strategic Partnerships: Who’s Your Blue Line Bank? (August 17th)

 


Last week, BLPG provided an update on the company’s operations which includes the opening of a new vaulting and cash processing facility in Denver, Colorado.


With 9 states voting to legalize some form of marijuana use tomorrow while traditional banks willing to provide services to cannabis companies remain few, shares in BLPG may just be starting to light up here.


Blue Line Protection - gary

 

 


See Disclosures/Disclaimer/Terms of Use

tapimmune-nasdaqTapImmune Inc. (web site) (Ticker: TPIV), a clinical-stage immuno-oncology company specializing in the development of innovative peptide and gene-based immunotherapeutics and vaccines for the treatment of cancer and metastatic disease, announced this morning that the company has received approval for quotation on the Nasdaq Market.

Trading of TPIV on Nasdaq will begin Tuesday, November 8th. 

 

Glynn Wilson, Ph.D, Chairman and CEO, TapImmune stated:

“Our listing on The Nasdaq Capital Market is a major corporate milestone for our Company and a testament to the tremendous progress we have made over the past few years.  Trading on the Nasdaq market will expand our visibility and provide us access to a broader investor base, enhance stock liquidity and attract institutional investors. This is not only designed to enhance the value of our company but to provide us access to resources to advance our Phase II clinical programs including our Folate Receptor Alpha program (TPIV 200) for breast and ovarian cancer and our HER2/neu peptide antigen program (TPIV 110) for HER2neu breast cancer”.


TapImmune has four different phase II clinical trials underway, as well as collaborations and partnerships with AstraZeneca, Memorial Sloan Kettering Cancer Center, and Mayo Clinic.

 

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TapImmune also announced a Commercialization Pathway For Its HER2neu Vaccine earlier this week.


Shares outstanding: 8.3 million
Closing Price 11/2/16: $4.95
Market cap: $41.5 million


We initially covered TapImmune in this September 19th article, and shares rose to $7.15 on higher than average volumes for a gain of 29% in the week following our report. More recently, shares have pulled back with the market in general and biotech/pharma stocks in particular.


With the upcoming Nasdaq listing creating a much larger pool of retail and institutional investors, this could be the perfect time to re-enter TPIV or add to an existing position. 


TapImmune has multiple near term forward drivers coming up in addition to Nasdaq uplisting, including:

  • Phase II Mayo Clinic-U.S. DOD Trial of TPIV 200 in Triple Negative Breast Cancer

TapImmune anticipates that this Phase 2 study of TPIV 200 in the treatment of triple negative breast cancer, conducted by the Mayo Clinic and sponsored by the U.S. Department of Defense (DOD), will begin to enroll patients in the fourth quarter of this year. The anticipated 280 patient study will be led by Dr. Keith Knutson of the Mayo Clinic in Jacksonville, Florida. Dr. Knutson is the inventor of the technology and an advisor to TapImmune.

While TapImmune is supplying doses of TPIV 200 for the trial, the remaining costs associated with conducting this study will be funded by a $13.3 million grant made by the DOD to the Mayo Clinic.


  • Phase II TPIV 200 Trial in Platinum-Sensitive Ovarian Cancer (Fast Tracked by FDA)

TapImmune expects to have at least one clinical site open in a Phase II trial of TPIV 200 in 80 ovarian cancer patients who are responsive to platinum in the near future. TPIVD received the FDA’s Fast Track designation to develop TPIV 200 as a maintenance therapy in combination with platinum, in platinum responsive ovarian cancer. This multi-center, double-blind efficacy study is sponsored and conducted by TapImmune.Dr. Glynn Wilson, Chairman and CEO of TapImmune states:

“We believe that the FDA’s decision to grant Fast Track designation to TPIV 200 for the treatment ovarian cancer significantly expedites our clinical development program. We look forward to starting Phase II trials in the near future to address this highly aggressive cancer. We believe TPIV 200 has the potential to improve outcomes for ovarian cancer patients for whom current treatment modalities offer a relative short time to recurrence and a poor overall prognosis.”


  • Open IND (Investigational New Drug) with FDA for TPIV 110 in Q4 2016

TapImmune has reformulated a second cancer vaccine product, TPIV 110, following very strong safety and immune responses from a Phase 1 Mayo Clinic study.TPIV 110 targets Her2/neu, which makes it applicable to breast, ovarian and colorectal cancer.  The reformulated product adds a fifth antigen which should produce an even more robust immune response activating both CD4+ and CD8+ T-cells.

TapImmune has already requested a pre-Investigational New Drug (IND) meeting with the FDA and submitted questions to the FDA related to opening the IND.

 


  • Preclinical Pipeline Expands TapImmune’s Breast & Ovarian Cancer Killer Therapies

 

tapimmune-preclinical-pipeline

 

  • Also Preclinical, A Next Generation T-Cell Vaccine: PolyStart

In February of this year, TapImmune received notice of allowance on a patent for a Next Generation T-Cell Vaccine called “PolyStart.”

This unique vaccine platform antigen expression system creates a 4 (FOUR) fold or more increase in antigen presentation.  The increased cell surface presentation increases activated Helper and/or long-lived Killer T-cell populations that then effectively seek out and work to destroy a patient’s cancer cells.

The below data from a current study showing the increased presentation and subsequent KILLING of the targeted cell population.

 

tapimmune-polystart

Dr. Glynn Wilson, Chairman & CEO of TapImmune explains:

“We are very excited about this technology, as we believe it marks a next generation of T-cell vaccines. PolyStart has unlimited application in oncology and infectious diseases not only within TapImmune’s own platforms but it can be applied to many others via licensing. As we move forward into Phase 2 trials for TPIV 200, which targets folate receptor alpha, and TPIV 100/110 our Her2/neu product, we fully expect to develop PolyStart as both a stand-alone therapy and as a ‘boost strategy’ to be used synergistically with our peptide-based vaccines for breast and ovarian cancer.” 

I believe PolyStart is the icing on the cake of this soon-to-be-discovered, Nasdaq listed, biotech standout.


Conclusion

TapImmune (TPIV) is a biotech stock that should gain solid traction with the pending Nasdaq uplisting. The company has 4 different clinical trials in Phase II for unmet needs in breast and ovarian cancers. Collaborations and partnerships with AstraZeneca, Memorial Sloan Kettering Cancer Center, and Mayo Clinic demonstrate the potential these world class organizations see in TapImmune and in the TPIV 100 & TPIV 200 clinical trials going forward.

The company has multiple positive drivers to increase momentum and share prices following the uplisting as well.


See also: October 2016 Investor Presentation


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