Diligence.

We look forward to sharing original stock market research and news from highly-experienced stock market investors, and experts in their respective industries.
Areas of interest: small-cap and micro-cap stocks in technology, biotech, and consumer products; special-situations; deep value; and underfollowed opportunities.

RESEARCH

Stereotaxis (STXS):

Stereotaxis: A Leader In Robotic Heart Surgery Is Ripe To Be Acquired
Jan. 30, 2019

Summary

• New STXS management is experienced and has major skin in the game, with insiders owning 67% of the outstanding shares.
• STXS is finally unburdened by debt and has enough cash to reach consistent profitability.
• STXS has a large installed base of machines in hospitals worldwide that is generating about $7 million per quarter in recurring revenue at an 80% margin.
• STXS is a no-brainer bolt-on acquisition for many robotic surgery companies,with its superior and patented robotic technology, and a high-margin razor/razor-blade business.

A Highly Undervalued Company In A Hot Market For Acquisitions Creates A Rare Opportunity
Stereotaxis (STXS) has developed an innovative magnetic robotic surgery system for repairing heart arrhythmias and other heart conditions. Extensive data shows that STXS’s robotic magnetic navigation (RMN) system is arguably better and safer than traditional laparoscopic methods, and hundreds of physicians have used the system over 100,000 times in some of the finest hospitals worldwide. With the STXS system, the success rate is higher, the rate of injury is lower, and the market for cardiac ablation surgery is growing for treating this heart condition, one that can be very serious and lead to heart attacks, strokes and death.

In fact, by 2020, the radio-frequency (RF) cardiac ablation market is expected to bring in $4.2 Billion, and the total market for RF ablation is predicted to be $10.6 Billion, with a CAGR of 12.1%. Very recent acquisitions in the robotic surgery space and STXS’s position as the leading player in RMN surgery should bring renewed attention to STXS, especially as STXS brings in over $28 Million in recurring revenue on a yearly basis at an 80% gross margin and is now completely debt-free.

After reviewing STXS’s recent management actions, industry trends, and balance sheet, I believe that STXS is worth at least 3 to 5 times its current stock price. This valuation is based on the valuation of robotic surgery peers, and recent takeovers of other robotic surgery companies.
The CEO of STXS stated in the most recent quarterly conference call: “The market opportunity remains very significant for new robotic ablation practices as the cardiac ablation market is among the largest and most rapidly growing medical device market with significant long-term tailwinds.”

STXS' History, Products And How They Got So CheapSTXS went public back in 2004, and now occupies a leading position in the cardiac ablation market. STXS’s patented system uses large magnets on either side of a patient to create a magnetic field. Then, physicians use a catheter (a long thin tube) with a magnetically guided tip that is guided into the heart through veins from a small incision in the groin area. Unlike traditional open-heart surgery or mechanical catheter surgery, the STXS system allows the surgeon to precisely move the magnetically guided catheter tip into the delicate chambers of the heart with a mouse or joystick with 1 millimeter precision.

Once the magnetic catheter tip is in place, the surgeon ablates (and therefore inactivates) the electrical pathway in the heart that is malfunctioning and causing arrhythmias, supraventricular tachycardias (SVTs), atrial flutter, or atrial and ventricular tachycardias. “Ablation” is the use of high-frequency electrical energy through the tip of the catheter to inactivate the electrical signals that are contributing to the heart’s arrhythmias.

In addition to heart operations, STXS’s RMN technology is applicable in many other areas such as brain surgery, and STXS has a huge patent moat covering the field. STXS has also recently announced a strategic collaboration with Acutus Medical, a global heart rhythm technology company with a cardiac mapping system that they are integrating with their own system. The Acutus Medical AcQMap® High Resolution Imaging and Mapping System will further enable physicians to map the heart before and during complex surgeries.

So what happened to STXS that took it from a market capitalization of $625 Million at its height in 2007 to the current fully diluted market capitalization of $124 Million? What has just recently changed to make the company’s fortunes look better than they have in a decade?
In CEO David Fischel’s own words, STXS’s past missteps included: aggressive premature commercialization, poor allocation of financial and human resources, limited engagement with partners and potential partners in the industry, and the lack of a clear innovation and commercial strategy.”
Previous management, as succinctly stated by Mr. Fischel, threw a lot of money at marketing and overhead in an effort to grow as fast as possible. But it was too much, too soon. In order to continue in that mode, they made a deal with a fund in exchange for upfront cash, and STXS pledged its future royalties from catheter sales (the “razor blades”). After a while, the debt was unsustainable, and STXS had to scale back its sales and marketing. New investors came in, and have taken a very active role in revitalizing the company.

The Argument For Robotic SurgeryRobotic surgery enables the “democratization of skill.” Even surgeons who have less than top-notch skills when performing manual surgery can be assisted by robotics to even out abrupt movements, move a laparoscope or catheter through a body, make incisions, and make stitches. Strength and fatigue is also less of an issue with robotics, since a robotic system relieves the requirement of manual force, and takes a lot of strain off of a surgeon during long procedures.
Also, per Intuitive Surgical (ISRG), robotic surgery can have these many benefits in exchange for the upfront cost:

• Reduced length of stay
• Fewer conversions to open surgery [from laparoscopic surgery]
• Reduced complications
• Fewer readmissions
• Lower infection rates

As a result, and because of continued technological advances, robotic surgery has become ubiquitous worldwide.

The Market For Cardiac Ablation

Per David Fischel, the CEO of STXS, in the Q4 2017 results conference call, there are 850,000 cardiac ablation procedures performed every year and over $4 Billion in annual sales of medical devices for such procedures. In addition, Mr. Fischel noted that a late 2017 publication in the New England Journal of Medicine found a 46% reduction in mortality at three years versus the best drug therapy.
In addition, Mr. Fischel stated that “an independent meta-analysis published in the September issue of The Journal of Interventional Cardiac Electrophysiology compared 779 Ventricular Tachycardia Patients treated with Stereotaxis robotic technology to manual catheters. The results showed clinically meaningful and statistically significant benefits for robotics across the trifecta of efficacy, safety and efficiency, including a 39% lower risk of VT recurrence, a 65% reduction in complication and shorter procedure times.” [emphasis added]

The STXS Advantage In Cardiac SurgeryAccording to the company and the latest scientific studies, because of its precision, size, and gentleness, STXS’s system is especially warranted in complex and difficult heart procedures. There are numerous scientifically proven benefits of RMN technology over manual catheter operations.

STXS likens traditional laparoscopic technology to signing your name by holding a pencil by the eraser. The surgeon must control the direction of the tip of the catheter by hand by using controllers that look like scissor handles, often with three feet of guide wires. It can be imprecise, taxing on the surgeon’s muscles and tendons, and can require strength and stamina.

Click here for the full article: Stereotaxis Research

Wrap Technologies (WRTC):
Wrap Technologies Introduces A Policing Tool That Will Rival The Taser
January 16, 2019
Summary

• Axon Enterprise, Inc. pioneered the "Less than Lethal" police weapon market with their Taser conducted electrical weapon. But the Taser has drawbacks, and police departments need an alternative.
• Wrap Technologies (WRTC) has introduced a patented weapon that will deliver on the original promise of the Taser: A non-lethal restraint device that will truly help police de-escalate conflicts.
• In only 6 months, WRTC has demonstrated its BolaWrap for over 100 U.S. police departments; 40+ of those are now in active testing. 500+ agencies worldwide await requested demos.
• WRTC has assembled team of experts including numerous ex-police chiefs and former police officers to take this technology to the market.
• Increasing attention paid to police use-of-force issues, massive lawsuit settlement costs, and the desire for departments to de-escalate contacts with the public should lead to rapid sales.

The police have a difficult job. While their official role in society is law enforcement, police are also on the front lines of dealing with mental health crises. The mental health support infrastructure in the United States and in many parts of the world has been decimated. Often when dealing with a mentally unstable person or somebody under the influence of narcotics, current tools are ineffective or even counterproductive.
Wrap Technologies (OTCQB:WRTC) has developed the BolaWrap for the broad range of circumstances where the police want to restrain somebody while de-escalating the situation. Based on the early reaction of the Law Enforcement community, as we’ll reveal below, it looks like WRTC has a huge winner on their hands. That is why I have invested in WRTC, and I believe that the company will provide extraordinary returns to early investors.
Here is a 5 minute video created by WRTC which highlights the need for the BolaWrap, and demonstrates the BolaWrap in action:

https://youtu.be/EyoUIJjCFgo


A SHORT DESCRIPTION OF THE DEVICE
The BolaWrap is 6 inches long, 2 inches wide and 1 inch thick. A single-use Bola cartridge is loaded into the top of the device, and re-loadable in seconds after discharged. The officer cocks the device and aims it with the assistance of a green laser beam. When the officer presses the trigger, an 8 foot long Kevlar cord shoots out of the device at over 640 feet per second. The cord wraps around the target’s body 2 to 3 times and stays in place by way of barbed hooks on each end of the cord.

Source: Wrap Technologies Product Specifications Sheet

A “STORY STOCK” THAT IS MORE THAN JUST HYPEWRTC is what I consider a “Story Stock” - a company whose product is easy to describe in a couple sentences and is captivating to the media.
If there’s any doubt that WRTC has captured the media’s attention with the BolaWrap, look at these features from U.S. media: ABC Eyewitness News Chicago, News 12 Brooklyn, CBS 4 Miami; around the world in The Times of London; and on non-English language stations such as Telemundo. The BolaWrap has been featured on TV news segments more than 60 times within the last year.
The BolaWrap was even featured in this scene of the C.B.S. show S.W.A.T.:

https://youtu.be/GElQ8OkOwwo


What a story stock needs to make it more than just a quick trade is the same for any good investment. Here are my categories for determining a good investment: Market Need / Market Size; Intellectual Property Moat; Proven Technology; Experienced Management; Clean Corporate Structure / Insider Support; and Access to Capital.
Below I’ll detail how I think WRTC stacks up in each category.

Click here for the full article: Wrap Technologies (WRTC) Research

SPROUTLY (SRUTF):
Sproutly's Water-Soluble Cannabis Technology Is Making Waves In The Marijuana Industry
December 11, 2018
Summary

• Cannabis is rapidly becoming a commodity business, requiring differentiation and branding for lasting success.
• The "Holy Grail" of cannabis beverages is a truly water-soluble technology, which means marijuana's effects are felt in only 5 minutes and they end in under 90 minutes.
• Sproutly has obtained exclusive rights to a patent-pending water-soluble technology that promises to revolutionize the cannabis infused beverage and edible market.
• It is an opportune time to purchase shares of Sproutly, a well-funded but under-the-radar company that could capture the market for cannabis beverages through the decade-long research of a Princeton-educated Ph.D.
• Sproutly also wholly-owns an ACMPR licensed 16,600 square foot Toronto-area pharmaceutical grade cannabis production facility with a 1,400 kilogram per year production capacity.
• The global trend toward marijuana legalization has resulted in explosive growth in cultivation and consumption. In fact, before the wave of legalization, as long ago as 2012, marijuana was claimed to be the most popular drug in the world, with an estimated 119 million and 224 million users in the world's adult population. The rush of companies to capitalize on the trend and the rush of capital into the space has been exciting and has created multiple behemoths in record time. Yet like all blue sky growth stories, this one will eventually be seen to follow the regular cycle. As more and more companies come online with their expansive build-outs of growing and processing capacity, wholesale marijuana will become a commodity. There will be a period of excess capacity - a glut - since there is no shortage in arable land, water, or equipment. Pot is already plentiful in Colorado, California, and other states. While Canada currently is experiencing shortages after their recent legalization of recreational weed, they are about to see an explosion of production as huge Canadian companies like Canopy Growth Corporation (CGC), Tilray (TLRY), Cronos Group (CRON), and Aurora Cannabis (ACB) build out their capacities and work out the supply chain kinks.
• When commoditization is in full bloom (forgive the pun), what comes next?

A RECIPE FOR SUCCESS IN CANNABIS
I believe there are three ways to succeed as a weed-related company in a market that supplies a commodity:
1. Capture consumers through marketing and branding;
2. Sell an ancillary product or service to succeed regardless of who becomes the brand leaders (the "picks and shovels" approach);
3. Differentiate your marijuana product so it provides an improvement over the commoditized product and becomes a premium product.

I'm going to briefly touch on 1 and 2, but focus on number 3 in this article. A tiny company by market capitalization has developed a patent-pending and proprietary method of extracting bioactive cannabinoids and other elements from marijuana, and I will argue that the process that they have developed, if it meets claims and expectations, is the "holy grail" of the marijuana industry.
The name of the company is Sproutly Canada Inc. (OTCQB:SRUTF). Sproutly recently came public in Canada on the CSE and has listed on the OTCQB in the United States. Sproutly is a filing company with both SEDAR in Canada and the SEC in the U.S. Sproutly acquired Infusion Biosciences Canada from Infusion Biosciences Inc., and in this transaction Sproutly has obtained all rights in a number of huge territories to a remarkable and heretofore unknown process that actually extracts water-soluble forms of bioactive cannabinoids from marijuana. The name of their product is INFUZ2O.
Until Infusion Biosciences discovered that it was possible to extract water-soluble cannabinoids from cannabis, it was thought that such cannabinoids could only travel in an oil-based form and could not be water soluble. According to Infusion Biosciences, the Aqueous Phytorecovery Process (APP) uses proprietary, not-toxic, generally recognized as safe (GRAS) reagents to extract water-soluble forms of the bioactive cannabinoids in cannabis such as THC and CBD.

There are numerous companies that claim their formulations are water-soluble. However, they are markedly not. At most, other companies have technologies that are "water-compatible", meaning that they can be suspended in water by being encapsulated in oil-based molecules, and they are often combined with chemicals and sweeteners to assist in suspending the cannabinoids in fluid and to mask the taste.
Water-solubility of bioactive cannabinoids is a groundbreaking development for these three reasons:

• Due to being water soluble, the effect of Sproutly's beverages have an onset time of less than 5 minutes, which clears the body within 90 minutes;
• Sproutly's water-soluble cannabinoids can be uniformly incorporated into a variety of beverages and edible products, and is tasteless and odorless;
• Sproutly's technology allows the unique characteristics of each strain of marijuana to be naturally extracted to enable the "whole plant" to be included into a product.

One at a time, let's address these ground-breaking developments:

Click here for the full article: Sproutly Research

DIGITAL ALLY (DGLY):
Summary

• Four years ago, after civil disturbances sparked by police shootings, Digital Ally, Inc.'s body-camera systems with innovative synchronization auto-activation technology were in high-demand, causing its stock to soar.
• Larger rivals muscled in, preemptively and repeatedly trying to invalidate Digital Ally's patents at the USPTO, using what Digital Ally claims as its own technologies to dominate the market.
• Digital Ally emerged completely victorious at the Patent Office, and the courts have just lifted the stay on Digital Ally's multiple patent infringement lawsuits.
• As Digital Ally's opponents now face the credible threat of rulings in Digital Ally's favor which could lead to large monetary damages and injunctions, Digital Ally's long-suffering stock looks attractive.

As Digital Ally Finally Gets its Day in Court, the Stock's Potential looks Bright
In this article, we will describe the recent history of Digital Ally (DGLY) and make the case that after many successes defending its intellectual property     from much larger rivals, DGLY goes to court with a strong case and a statistically large chance of either a settlement or victory in front of a jury.

To continue reading, please click the link below:

seekingalpha.com/article/4206016-digital-ally-maker-police-body-cameras-back-focus-ready-close