We first highlighted World Media & Technology Corp (OTCMKTS:WRMT) as being a technology stock to keep an eye on back in April 2016. At the time, the company had run up to around four dollars a share from less than a dollar apiece and we suggested that anyone with an exposure might want to book profits on the back of the then current run, but might also want to keep an eye on the stock subsequent to exit in anticipation of a near-term correction but then a return to the overarching upside momentum throughout late 2016 and – beyond – into 2017.
Between our first coverage and the third quarter of 2016, the company dipped to around $0.85 a share. During the fourth quarter of 2016, however, the upside momentum returned, and World Media & Technology Corp closed out the year at around $4.50. By mid-January, the company traded for as high as $28 a share.
Subsequent action has brought with it something of a correction, with World Media & Technology Corp spending the majority of the first and second quarters of this year in and around the $12-$15 range. This week, however, has brought with it some strong upside momentum, and the company will open the session on Wednesday in the US at $23.55 a share, having gained 14.32% on Tuesday.
For anyone that picked up an exposure throughout the second and third quarters of last year subsequent to our highlighting of this one, congratulations on the 1000 percentage points plus gain.
The question now is, what’s next? Are we going to see something similar to what we saw on the back of last year’s run (a correction followed by a return to the upside momentum) or is something different on the cards?
Right now, we are leaning towards the former.
For those not familiar with this company, it’s a technology company that operates at the crossover point between technology and healthcare. Its lead product is an application called HELO that is designed to monitor blood glucose and diabetes patients (as well as a host of other vital type measurements) and that combines with a wristwatch monitor (also called HELO) to enable functionality.
Over the last few months, we have seen a number of updates from management related to this technology and its rollout, most of which have come direct from the company’s website as opposed to by way of press release.
As part of this release, we learned that the company was profitable during the first quarter of 2017, having shipped 100,000 units of the HELO hardware. This generated $500,000 in what the company refers to as license revenue in this quarterly report, translating to a modest, but nonetheless positive, $4800 net income for the period.
Cash on hand at the end of the period was a little over $550,000, with a further $900,000 in accounts receivable. Burn comes in at somewhere around $450,000 quarterly as things stand.
For clarity on the licensing revenue model, check out this link.
Basically, the company provides its tech, branding and device designs to approved manufacturers who take orders directly from approved distributors and pay WRMT a fee per Helo shipped. The current agreement sees the manufacturers pay a one-off fee of $4.00 per Helo Classic and five $5.00 per Helo LX that gets shipped from its manufacturing facility.
This, then, explains the 100,000 units generating $500,000 revenues (with the assumption being that all units shipped are Helo LX units).
So what’s next?
Well, this license type business model means costs remain incredibly low and affords the company the opportunity to generate relatively substantial revenues without too much effort. We see this as a near-term value driver, but we would like to see more units shipped as justification for the company’s current valuation, which comes in at around $670 million. If units shipped during the second quarter builds on those shipped during the first, there’s every chance we will see a continuation of the recent run.
As per this release, there is also an uplisting in the pipeline.
This, of course, could also induce some upside momentum, but management is going to have to bring the company to current with its SEC filings before any uplisting will become a reality. This isn’t necessarily a hindrance to value appreciation, however. As the audited filings come in, the company is probably going to run on the back of increased clarity and – by proxy – the reduced risk associated with an exposure.
Get the whole story: check out our previous coverage here.
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Image courtesy of Alan Levine via Flickr
Disclosure: We have no position in WRMT and have not been compensated for this article.