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.
“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”
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 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.
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.
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!
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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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.
“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.
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:
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:
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.”
“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
Shareholders’ Equity (deficit)
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.
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.)
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.
Blue 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.
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.
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.
TapImmune 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.
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 200as 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
Also Preclinical, A Next Generation T-Cell Vaccine: 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.
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.
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.
Medovex 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.
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.
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
The DenerveX™ System developed by MDVX provides long-lasting relief from pain associated with facet joint syndrome.
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
DenerveX™ System Represents Immense Savings for Patients and Health Care System*
*Estimates are for a 3 year period
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.
“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:
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.
MassRoots 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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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.”
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.
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.
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
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.
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.
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.
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.
Below is our tracker of where cannabis is legalized, where cannabis is legalized for recreational use, and where there are now laws legalizing cannabis.
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:
KSIX 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
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 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 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.
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
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.”
“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.”
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.
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).
Stocks Finish Friday Flat, While Wielding Weekly Gains
U.S. stocks finished the regular trading session near the unchanged mark as corporate earnings reports were in focus with the domestic economic front void of any major releases.
Technology issues moved higher as Dow member Microsoft easily bested expectations, while fellow Dow component General Electric reported revenues that fell short of forecasts. Global monetary policy and political uncertainty continued to elicit concerns. Treasuries were mixed, while gold, the U.S. dollar and crude oil prices gained ground.
The Dow Jones Industrial Average (DJIA) lost 17 points (0.1%) to 18,146, the S&P 500 Index was unchanged at 2,141 and the Nasdaq Composite gained 16 points (0.3%) to 5,257.
In moderate volume, 851 million shares were traded on the NYSE and 1.6 billion shares changed hands on the Nasdaq. WTI crude oil decreased $0.22 to $50.85 per barrel, wholesale gasoline gained $0.04 to $1.53 per gallon and the Bloomberg gold spot price added $1.27 to $1,267.03 per ounce.
Elsewhere, the Dollar Index-a comparison of the U.S. dollar to six major world currencies-was 0.4% higher at 98.66. Markets were mostly higher for the week, as the DJIA gained nearly 0.1%, the S&P 500 Index increased 0.4% and the Nasdaq Composite was 0.8% higher.
Dow member Microsoft Corp. (MSFT $60) reported fiscal 1Q earnings-per-share (EPS) ex-items of $0.76, above the $0.68 FactSet estimate, as revenues rose 3.1% year-over-year (y/y) to $22.3 billion, versus the expected $21.7 billion. The company said its 1Q results showed continued demand for its cloud-based services. MSFT rallied. We had a good day led by our largest position FB 132.+2. We rebuilt our Swing Trade Portfolio this week going from 80% cash to 15% in cash.Our portfolio contains four recent IPO’S, a gold stock, and AAPL and FB.
AFTER MARKET ROUND-UP
Dow Jones 18,145.71-16.64 -0.09%
S&P 500 2141.16 -0.18 -0.01%
NASDAQ 5257.40 +15.56 +0.30%
WTI Crude Oil 50.86 +033 +0.45%
GOLD 1267.40 -0.10 -0.01%
SILVER 17.540 -0.009 -0.05%
10 Year Yield 1.740
DXY (USD Index) 98.651+0.33 +0.34%
Economic Activity for Monday
US Chicago Fed National Activity 8:30 AM ET
US PMI Manufacturing Index Flash 9:45 AM ET
Nasdaq Listed, EBITDA +, High Tech, Turnaround Stock Pick Released Tomorrow
We’ve discovered a fantastic turnaround stock play that we will release tomorrow morning, Monday, 10/24, at 9:30 am.
The company we’re profiling here at MicrocapResearch.com has about 3,000 customers currently and $28 million in revenue. Just recently the businesses “turned the corner”, delivering positive adjusted EBITDA of more than $400K in 2Q’16.
The company is disrupting its landscape by offering business customers Internet access for 40% below competitors, and management sees $70 million in revenue by 2020 vs. just $27 million during the trailing twelve month period.