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


tapimmune -gary pic

 

 

Disclaimer/Disclosure/Terms of Use

medovex-logo-blue-e1421779719549Medovex Corporation (MDVX) (web site) develops medical devices primarily in the in the United States and Europe. It offers DenerveX device for the treatment of conditions resulting from the degeneration of joints in the spine, which cause back pain. The company serves healthcare providers, physicians, and third-party payors. Medovex Corporation is headquartered in Atlanta, Georgia.

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MDVX at a glance:

Shares Outstanding: 14 million
Insider Ownership: 38%
Float: 8 million
Closing Price 11/01/2016: $1.66
Market Capitalization: 23 million


Multi-Billion Dollar Market Opportunity

Osteoarthritis (OA) is the most common form of arthritis, affecting 27 million people in the United States and The Centers for Disease Control and Prevention lists low back pain as the second most common cause of disability in US adults. With the advancing age of the population and obesity epidemic, the prevalence of OA is also increasing:

  • By 2030, 20% of Americans or about 70 million people age 65 and older, will be at risk for osteoarthritis
  • Fifty percent of people age 65 and older already exhibit evidence of osteoarthritis in at least one joint

Osteoarthritis of the spine, known as spondylosis, is a degenerative disorder that can cause loss of normal spinal structure and function. Aging is the primary cause. Spondylosis can affect the cervical, thoracic and/or lumbar regions of the spine, and may involve intervertebral discs and facet joints, which can lead to disc degeneration, bone spurs, pinched nerves, and an enlargement or overgrowth of bone that narrows the central and nerve root canals, causing impaired function and pain. When spondylosis worsens, it may progress to spinal stenosis, a narrowing of spaces in the spine, which results in pressure on the spinal cord and/or nerve roots.

A related condition, degenerative spondylolisthesis (slippage of one vertebra over another) is caused by osteoarthritis of the facet joints. Most commonly, it involves the L4 slipping over the L5 vertebra, and is also related to aging, most frequently affecting people age 50 and older. Symptoms may include pain in the low back, thighs, and/or legs, muscle spasms, weakness, and/or tight hamstring muscles.

medovex-facet-joint

 

Approximately 31% of chronic low back pain is attributed to the facet joints, small stabilizing joints located between and behind adjacent vertebrae. Facet joints are in almost constant motion with the spine and quite commonly simply wear out or become degenerated in many patients. When facet joints become worn or torn the cartilage may become thin or disappear and there may be a reaction of the bone of the joint underneath producing overgrowth of bone spurs and an enlargement of the joints.

Chronic back pain caused by facet joint arthritis is a multi-billion dollar market opportunity that currently has no effective, long term/permanent solution.  

 

 


Temporary Relief vs. Permanent Solution

Current treatment for chronic back pain caused by facet joint arthritis includes medications for pain relief, spinal injections, and radio frequency (RF) ablation.

medovex-treatment-options-chronic-back-pain

Unfortunately for the many individuals suffering from chronic back pain due to facet joint osteoarthritis, these options are not permanent solutions.


Permanent Solution from Medovex

medovex-chronic-back-pain-relief

The DenerveX™ System developed by MDVX provides long-lasting relief from pain associated with facet joint syndrome.

medovex-denervex

Using a two-step procedure of facet joint capsular tissue removal and RF Ablation with the DenerveX™ System, MDVX demonstrated positive outcomes via a study of 174 patients:

  • A total of 77%, 73%, and 68% of patients with cervical, thoracic, or lumbar disease, respectively, showed at least 50% improvement in pain at 3 year follow-up
  • The majority of patients achieved a 75% to 100% improvement (VAS pain score) at 3 year follow up
  • Overall, 76%, 60%, and 75% of patients with cervical, thoracic, or lumbar facet disease, respectively, had at least a 50% improvement in Oswestry Disability Index (ODI) scoring
  • Most patients experienced a 75%-100% improvement at 3 year follow up

(see: Endoscopic Facet Debridement for the treatment of facet arthritic pain – a novel new technique)

 

 

 


DenerveX™ System Represents Immense Savings for Patients and Health Care System*

medovex-health-care-savings

 

*Estimates are for a 3 year period


medovex-generator

 

medovex-kit


CE Mark Approval in Europe Pending

MDVX management stated in a conference call yesterday (11/1/2016) that CE Mark approval in the European Union is expected in the first half of 2017, and that their recent presence at the EuroSpine 2016 Tradeshow in Berlin was very rewarding.

Medovex President and COO, Patrick Kullmann, recently stated:

“We conducted meetings and demonstrations with at least six potentially strategic companies that could open the door to future collaboration for distribution, investment, co-future development of future generations of the technology or even potential acquisition. Many of the spine surgeons and pain relief physicians visiting the booth stated that the DenerveX Design is very elegant, and represents a very new and creative approach in treating pain associated with the Facet Joint Syndrome. Their clear appreciation for our different approach in performing a new procedure by way of a posterior capsulectomy of the facet joint, compared to the less effective standard radio frequency ablation (Rhizotomy), gives us cause for continued cautious optimism going forward.”

Medovex has opened a European distribution service center, and already has a Diagnosis-Related Group (DRG) designation in Europe. The DRG designation is a very positive milestone for MDVX as it terms of future billing for DenerveX™ System treatment and reimbursement. 


EU/Worldwide DenerveX™ System Commercialization

Investors should expect positive and frequent updates as MDVX moves along the commercialization timeline below:

medovex-product-launch


High Insider Buying/Ownership

As the saying goes, there are many reasons why insiders might sell a stock, but there’s only one reason why they buy it.

medovex-insider-buying

Source: Nasdaq.com


MDVX Investment Highlights

  • Founded by Steve Gorlin (Entremed, Medicis, Medivation, MiMedx) and James Andrews MD (world renowned orthopedic surgeon)
  • Experienced and proven management team and board of directors
  • High insider ownership (38%)
  • Huge, highly opportunistic market opportunity
  • Scalable high growth, recurring revenue model with strong margins and clean balance sheet
  • Intellectual property portfolio (300 claims)
  • Anticipated CE marking first half 2017 with already established international distribution
  • Positive news flow over the coming weeks and months as company begins commercialization and revenue generation

Best wishes for profitable investing!

Medovex corp gary

 

 

See Disclaimer/Terms of Use/Disclosures

massroots-logoMassRoots Inc. (web site) is one of the largest and most active technology platforms for cannabis consumers and businesses with over 900,000 registered users. It’s “Yelp for Cannabis” mobile applications aim to connect its passionate community with the best products and dispensaries in their neighborhoods.

We see exciting opportunity ahead for this business considering:

  • targeting a $7.2 billion cannabis market that is expected to grow to $23 billion by 2020
  • rapidly growing advertising revenue stream now count Uber and Univision as paying advertisers
  • 900,000 registered user base is growing around 30,000 new users organically per month, which does not consider new product roll-outs about to occur, the Ohio market opening up next year, or the wave of new states to join the legalization trend
  • per month costs are currently running $300,000 per month with $150,000 of revenue, but the gap is on track to close by year end 2016
  • a vast array of ancillary business opportunities for the management team, as demonstrated by the recent Flowhub investment

We believe Massroots will grow rapidly to over $100 million in market capitalization versus the $44 million current market cap considering the business has 900,000 users and is experiencing extremely rapid growth. Weedmaps was valued at $300 million with only 750,000 users. Leafly was valued at $425 million with only 1 million users.

Legalization of marijuana for medical use, or expansion to include recreational use is on the ballot in Florida, California, Nevada, Maine, Arizona, Massachusetts, and Arkansa. Polls indicate legalization likely to pass in most, or even all of these states. 


MSRT at a glance:

Shares outstanding: 52.7 million
Approximate float 19.1 million
Closing Price 10/26/2016: .81
Market Capitalization: 42.7 million

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Market Opportunity

The legal marijuana market is a booming industry that is experiencing record growth. States continue to expand both medical and adult use in the US. According to ArcView Market Research, the US. cannabis market was $5.7 billion in 2015 and is expected to reach $7.2 billion at the end of 2016. By 2020 the market is estimated to reach over $23 billion with a compound annual growth rate of 32%.

MassRoots CEO Isaac Dietrich recently stated:

“The 2016 election cycle has the potential to significantly increase MassRoots’ subscriber and revenue growth. When a state passes a medical or recreational cannabis law, MassRoots is able to start registering users and businesses in that state with minimal marginal cost.  At the same time, our financial model is not tied to the success of a particular location, brand or a particular ballot initiative – we believe we will have a significant percentage of all dispensaries and brands on our platform, making MassRoots a play on the industry as a whole.”

 


Revenue Outlook

For six months ended June2016, MassRoots generated $585,000 in revenue primarily through digital advertising for dispensaries and cannabis brands in Colorado and California. The company expects to be able to scale its annual revenues to millions of dollars as additional states regulate the production and sale of cannabis.


Strong Recent Additions to Highly Respected Management Team

The company’s leadership is well regarded. The management team, board as well as designers and engineers hail from leading companies such as: Salesforce, Microsoft, Skype, Motorola, Target, Barracuda, Blizzard Entertainment, The Walt Disney Company, Snapchat, Mashable, Coca Cola, and more.

MassRoots’ team is extremely qualified with the tools to build upon a great business in a thriving industry. Most recently, the company added a new CTO from Salesforce and a new board member from Mashable.


Recent $5 million financing completed

This occurred just this month October 2016. The fact that the equity was raised demonstrated strong commitment from investors to the company. It also highlights the bright outlook the market sees for the company heading into this year’s voting cycle.


Advertising Revenue

This revenue stream was launched in August 2015. The problem out there is that cannabis companies can’t advertise on Facebook or Google, and the “enthusiast” cannabis demographic is incredibly hard to target. MassRoots provides a self-service advertising portal that enables cannabis-related businesses to reach cannabis enthusiasts through MassRoots, social platforms, and cannabis-related websites. The advertising packages offered range from $2,000 per month to $25,000 per month. Advertisers can list on the company’s blog, it’s Facebook page, or through other forms.


Data Sales

Another angle to the business is quickly developing, data sales. Dispensaries don’t know what to stock their shelves with. Growers don’t know what to produce. New companies entering the space don’t know where to spend R&D. MassRoots has a business dashboard featuring MassRoots’ proprietary product data in easy-to-use, actionable formats. We suspect customers are going to love soon being able to pinpoint what product is best for back pain versus nausea and so on. Moreover, robust product level data is a key stair step for the company to move into other arenas long term, such as facilitating commerce between users and dispensaries, after all MassRoots is tracking all the inventory, with opportunities for loyalty programs as well.


Tremendous User Growth

massroots user growth

In only a short period of time, MassRoots has grown its user base from nothing to over 900,000. The company adds approximately 30,000 users per month primarily through organic growth. The massive community of the world’s top cannabis enthusiasts collectively engage over 300,000 times per day on the network. Average daily mobile users is 1750,000. The website gets about 200,000 unique visitors per day, and we are told the platform can easily handle 1 billion unique visitors/day. The company has 10-15% of the addressable market in Colorado. Ohio is coming online next year and the company is eager to expand. Customer acquisition costs have been around $0.80 but are now lower. Revenue per user is targeted to soon be running around $1.00.


Flowhub Investment

In May 2015, the company invested in Flowhub. Flowhub is building a dispensary point of sale system. Since formally launching in June 2016, Flowhub has facilitated more than 250,000 transactions across dozens of dispensaries in Colorado and Oregon. Through its point-of sale and grow management software, Flowhub automates and streamlines business operations for cannabis dispensaries and cultivators. MassRoots believes Flowhub is at a critical inflection point, poised to scale from dozens of dispensary locations using its platform now to hundreds of locations by the end of the year. Within the next few months, the company believes a significant percentage of all transactions occurring in the regulated cannabis industry will occur on the MassRoots/Flowhub platform. In our view, we really like the company’s effort to expand upon the legacy advertising revenue into other forms of more recurring revenue.


Valuation

By focusing on community-driven reviews rather than static information, MassRoots believes it will enable users to find the best products in the shortest amount of time. MassRoots’ recurring usage and the ability to push additional services as features rather than standalone apps presents a superior value proposition to users than both WeedMaps and Leafly. WeedMaps a dispensary locator founded in 2007. It has 750,000 users (as of April 2015), a valuation of $300 million (as of June 2014) and $25 million estimated revenue for 2016 (as of April 2015). Leafy a strain resource guide founded in 2010. It has 1 million users (as of October 2015), a valuation of $425 million (Privateer Holding company of Leafly raised in April 2015) and $16 million estimated revenue for 2016.


Execution

We spoke to CEO Isaac Dietrich. One impressive fact was how he has been nimble and willing to make changes to drive results. For instance, the company now has 3 sales reps. A new sales director will be starting soon. The sales force is paid a 10% commission. Gross margins are 93%. The sales force model is critical to monetizing the company’s assets. Though it just isn’t so easy. 8 months ago the company had now sales force. Then the time came to try to ramp revenue and headcount was increased to 33. Though as always in business not everything works out as planned. Dietrich had to lead an effort to reduce staff to 19. He wisely kept the engineering team the same size and scaled down other areas. He cut several hundred thousand dollars per month out of the budget. The sales force situation described above is now concentrated on top performers and repeating best practices that are behind the results. We think all of the above describes a savy entrepreneur in Dietric. With Ohio about to roll-out 1,000 to 1,5000 dispensaries next year and the country-wide legalization unfolding, we want management personal just like Dietrich at the helm who are taking big risks and course correcting along the way.


Legal Map

Below is our tracker of where cannabis is legalized, where cannabis is legalized for recreational use, and where there are now laws legalizing cannabis.

massroots-legal-map

 

The following states will be voting this year to further advance their laws: California, Nevada, Maine, Arizona, Massachusetts, Florida, Arkansa.

Recent polling indicates a rapidly expanding map for MassRoots to leverage following the November 8th elections:

That’s a lot of  new “mass” for MassRoots to expand into!

Based on recent high growth rates + even greater accelerating growth in both users and sales, now is a great time to average into a position inMSRT.

 


See also June 2016 Investor Presentation


massroots gary signature

 

 

See site wide Terms of Use/Disclosures/Disclaimer

KSIX Media logoKSIX Media Holdings, Inc. (KSIX) is an SEC fully reporting media and Internet company undergoing dramatic and valuable restructuring with the planned acquisition (see press release) of a profitable telecom company, True Wireless LLC.

In the past 9 months of operations, True Wireless has generated $8.75 million and $2.4 million of net income.

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Current shares outstanding: 46 million
Closing price 10/25/2016: .16
Market Capitalization: $7.4 million

 


ksix-media-and-tw-logo

True Wireless LLC (web site) is a telecommunications carrier that provides discounted and subsidized cell phone service to those who qualify. The company provides government sponsored/ supported cell phone service in Texas (TX), Oklahoma (OK), Arkansas (AR), Maryland (MD) and Rhode Island (RI).

The service is subsidized under the Federal Communications Commission Lifeline Program for Low Income Consumers. The Lifeline program is available to eligible low-income subscribers in every state, territory, commonwealth, and on Tribal lands.

Tentative deal terms include:

1) Cash payment of up to $6 million through a debt instrument
2) A promissory note of $6 million
3) The issuance of common stock in KSIX totaling 24 million of shares of common stock

Management anticipates having approximately 75 million shares outstanding post close of the transaction.

As of yesterday’s close, the post-acquisition market capitalization for KSIX is just $12 million, assuming 75 million shares outstanding.   

Considering the acquisition is for a company with nearly $9 million in sales and $2.4 million in net income during just the last 9 months, look for shares to climb much higher. 


We will be keeping subscribers updated on developments as they arise.

towerstream corp gary

 

 


See site-wide Terms of Use/Disclosures/Disclaimer

 

Towerstream Corporation (NADSAQ: TWER)

towerstream-logo

Towerstream Corporation (web site) provides fixed wireless broadband services and delivers high speed Internet access to commercial customers in the United States.  Its wireless broadband service supports bandwidth on demand, wireless redundancy, virtual private networks, disaster recovery, bundled data, and video services.

The company offers services to business customers in New York City, Boston, Chicago, Los Angeles, San Francisco, Seattle, Miami, Dallas-Fort Worth, Houston, Philadelphia, Las Vegas-Reno, and Providence-Newport.  Towerstream Corporation was founded in 1999 and is headquartered in Middletown, Rhode Island.


Towerstream currently has about 3,000 customers and $28 million in revenue. Just recently the businesses “turned the corner” delivering positive Adjusted EBITDA of >$400K in 2Q’16.

Towerstream is disrupting its landscape by offering business customers internet access for 40% below competitors.

Management sees $70 million in revenue by 2020.


Closing price 10/21/2016: $1.15
Shares Outstanding: 7.6 million
Float: 3.6 million
Market Capitalization: $8.8 million


Products & Services

Towerstream currently has 175 Major Points of Presence (POPs). POPs are located on the top of buildings such as the Empire State Building and Met Life in NYC (as shown in the picture below); the Hancock Building in Chicago, and the AON Building in Los Angeles. These POPs create a high-speed internet network in the sky. Currently, the company is working to build out networks in the 12 major US cities.

View From Towerstream’s Metlife POP In NYC

towerstream-1


Technology

Towerstream has a strong competitive advantage in technology. Today’s advanced microwave is faster than fiber and just as stable. It is a fraction of capex cost at $15,000 versus possibly as high as $200,000 for fiber. It takes a fraction of the time to deliver the service. Below is an illustration of the high-speed wireless connection in the sky created by the technology.

 towerstream-2

In an October 13th press release, CHIEF Operating Officer Arthur Giftakis explained:

“Fixed-wireless technology inherently provides a competitive advantage. The speed at which we can add buildings at our low cost also gives us a superior advantage over fiber and cable.”


On-Net Initiative Brings Path to $70+ Million Revenue

Towerstream installs high-cap radio and antenna on the roof, then an inexpensive, quick, wire run to install each customer. Towerstream can then sell aggressively to all customers in the building typically 40% below market pricing. The On-Net initiative enables all tenants in a building the potential to have access to Towerstream’s carrier-class high speed internet services with a simple cable run from a common room. Towerstream is able to leverage equipment that previously would serve only one customer to now serve many.

By year end, 440 buildings are expected to be On-Net, with 785 planned for by the end of 2017, and 1,060 likely by the end of 2018. The current average is 31 tenants per building. With a target 30% penetration and $250 ARPU (Average Revenue Per User), there is revenue potential for $2,325 per building per month. On-Net churn is typically 1%, which is half the telecom average. In summary, it is not hard to see the path to attractive future revenue potential.


Thousands of Buildings in Towerstream Network Footprint

towerstream-3

 


Mistakes by Previous Management Decimated Shares

In early 2015 Towerstream was a beloved business trading over $40/share,  invited to present at all the major investment conferences from Jefferies to Citi. Unfortunately, a lack of transparency, high cash burn, and other issues caused investors and analysts to run.

The company has since undergone major restructuring including replacing top leadership. The restructuring lasted into the first part of this year and Towerstream is in a much more stable place. Admittedly, however, it could take another 3-4 quarters for many investors to regain confidence.


New Business Model Brings Improved Transparency

The new business model is called On-Net. The old model HetNet is now shown as a discontinued operation. Under the new model, investors will receive more disclosures, such as ARPU (Average Revenue Per User) , number of customers, number of buildings, and sales productivity.


Switch to More Flexible Pricing to Achieve Desired ARPU

Towerstream is now offering a fully symmetric 100 Mbps service for as little as $450 per month, or in some cases only $300. Previously, pricing was a firm $699 for the 100 Mbps service. Moreover, Towerstream isn’t limiting itself to 100 Mbps service. Now the company is providing both larger and smaller pipes depending on customer demand. The drive is to develop a full-building ARPU in the $3,000 range monthly. This desired outcome is now build around the calculus that pricing per customer mix may float around varying levels. Increasingly Towerstream is becoming known for offering customers “offers they can’t refuse”.


Testimonials Highlight Customer Satisfaction

 “Please know that I’m a long time CIO and have had plenty of experience working with nearly all of the telecom companies in America.  I must tell you, I have never seen a more focused, competent, and coordinated team in my entire career, you were nothing short of brilliant. I was kept up to date at least daily and sometimes 2 or 3 times a day. This is extremely rare in today’s telecom world where a lot of people just go through the motions. Towerstream demonstrated the exact opposite and the Penn Virginia installation is living proof.  This was the best I’ve ever seen in my 30 years of leading and managing IT functions regarding the telecom discipline.”

Gary W. Bailey, Vice President IT, Penn Virginia Corporation

 

“Ever since the Towerstream High Speed Network service has been integrated to the Wiltern Theatre’s Corporate and Artists Network Segments the Venue can now consider itself as having contemporary Network access. The Venue for many years has had to endure slow DSL type of speeds as well as the continued failure of these types of circuits. Constant DSL modem resets caused grief to our Production and Tour Managers. Due to the Towerstream service along with an upgraded Wireless Network, the Wiltern now has a much better Network access experience. I have not once called in Towerstream Technical Support for any issues with service here at the Wiltern.”

Danny T. Speth, Manager of Global Corporate Office and Venue Technology, Live Nation/Ticketmaster

 

“In these very competitive economic times, Towerstream’s Internet connections allow us the flexibility to easily increase bandwidth as a selling point to our guests.”

Joan Rowland, Director of IT,  The Palms Hotel & Spa, Circa 39 Hotel


Digging Into The Palms Hotel & Spa Case Study Offers Deeper Insight

Offering enough bandwidth during peak season, at an affordable price, to meet traveler’s Internet needs is a must in the hotel business. Each year, the demand for Internet continues to spike. Today travelers require more bandwidth. At one time guests were using the Internet connection to check e-mail messages and web surfing. Guests are now streaming video, logging into chat rooms, and connecting to their home office putting more of a demand on bandwidth. During peak weeks, employees and guests often experienced Internet gridlock ultimately maxing out bandwidth and slowing down speed.

The time had come to install additional bandwidth, but finding affordable service with scalable features for peak weeks was a challenge. Initially, the decision was made to upgrade the property’s fractional T service to 3Mbps. The intention was to move to a full T1 connection, but the 3Mbps solution caught everyone’s attention. The price was a far better deal than most other companies T1 rates. Impressed by the service that would be received, it was an easy decision to make the switch to Towerstream.

When both hotels – Circa 39 and Palms – were up and running on Towerstream’s network, the connection between the two properties and their consultant management company was seamless. More recently, the Palms had Towerstream provide high-speed Internet for all their guest rooms. This guaranteed a reliable, fast and secure connection for all vacationing and business travelers. More importantly, Towerstream’s service featured the desired scalability. Bandwidth can be increased with just a phone call during high-occupancy periods. Initially the hotel was attracted to the low price that Towerstream offered, but the features of their 4G technology have given the Palms a competitive edge.


Conclusion

Towerstream reported $400K of EBITDA in 2Q’16, up from a negative figure in the preceding quarter unveiling “the turn”. Fundamentals are improving rapidly.

The business model of adding hardware to the top of a building then leveraging costs to deliver 40% below market price is a game changer.

At the current enterprise value of ~$35 million, we see compelling value considering the potential for the business to be $70+ million of revenue in several years, not to mention at one point shares traded for $40!

As Towerstream Corporation continues to improve transparency as well as top and bottom line numbers, we expect shares to rise accordingly.
Towerstream will report Q3 on November 9th, (press release).


Best wishes for profitable investing!

towerstream corp gary

 

 


See Disclaimer/Disclosure/Terms of Use