Week of August 29, 2016 Analysts Ideas of the Week CardioComm Solutions - ECG Software Management www.researchfrc.com Sid Rajeev, B.Tech, MBA, CFA Head of Research CardioComm Solutions - ECG Software Management This week, we are introducing CardioComm Solutions Inc. (TSXV: EKG). CardioComm, established in 1989, and based out of Toronto, is a global provider of consumer heart monitoring and medical electrocardiogram ( ECG ) device and management software solutions, with clients in over 20 countries. They have been a provider of choice for back-office ECG management software solutions for leading ECG device manufacturers. According to Kalorama Information, the global advanced patient monitoring market is worth approximately $31.4 billion. The company s technology is used in products for the recording, viewing, analyzing and storing of ECGs for diagnosis and management of cardiac patients. Their products / offerings include PC and LAN based products known as GEMS (Global ECG Management System), internet based SAAS and ASP software, and ECG reading services (see images below). The products are sold worldwide through a combination of an external distribution network and a North American-based sales team. The company has received FDA, Health Canada, European Union CE Mark, Australian TGA and Chinese SFDA market clearances for its software and ECG devices.
Page 2 HEARTCHECK PEN ECG DEVICE HEARTCHECK ECG MONITOR (Rx) Source: Company The company has executed strategic partnership agreements to provide software solutions to major industry equipment and solution providers. The following are two examples of when CardioComm offering solutions to two majors: Philips Health Care (NYSE: PHG) - needed wireless mobile cardiac telemetry GE Medical (NYSE: GE) - needed an arrhythmia monitoring solution CardioComm has been extremely active in the recent past, with a number of developments. The following list highlights the key press releases in the past few months: July 5, 2016 CONTINUES TO EXPAND INTO M-HEALTH MARKETS WITH NEW ECG MONITORING LICENSE AND CO-MARKETING AGREEMENT June 28, 2016 UNVEILS THE HEARTCHECK EKG WRIST BAND FOR APPLE AND ANDROID SMARTPHONES
Page 3 June 20, 2016 SMART MONITORING ECG SOFTWARE TO INTERFACE WITH CARDIAC SENSING WEARABLE DEVICES FOR SMARTPHONE CONNECTED MEDICAL-WELLNESS MARKETS May 31, 2016 COMPLETES ARRHYTHMIA SURVEILLANCE DEAL FOR MONITORING HEART DISEASE PATIENTS TREATED WITH DRUG ELUTING STENTS IN INDIA April 26, 2016 April 18, 2016 EXECUTES HEARTCHECK HEALTH AND WELLNESS ECG SCREENING AGREEMENT IN THE REPUBLIC OF IRELAND INTRODUCES NEW HEARTCHECK ECG DEVICES AND ECG MONITORING SERVICES TO WELLNESS, HEALTH & SPORTS CLUB MARKETS The company also sees new opportunities in the ECG device space (wearable devices GSM enabled, blue tooth connected, etc.) as well as the ECG service space (see images below). Source: Company
Page 4 Brief biographies of the company s CEO and the Chairman are listed below: Etienne Grima - MSc, CHE, Chief Executive Officer Mr. Grima has over 22 years of experience in basic and clinical research administration, business development and strengthening corporate performance. Recognized for a unique and multidisciplinary approach to overseeing operational performance and fiscal resources, Mr. Grima joined the Board of Directors of CardioComm in December of 2006. In January of 2008 he was requested to serve as the company's Chief Financial Officer and Corporate Secretary during a period of organizational restructuring. In May of 2010 he accepted the position of Chief Executive Officer. Mr. Grima has also held the position of Chief Operating Officer and Financial Officer for the Canadian Heart Research Centre (CHRC) since its start in 1996 and a similar role in MD Primer Inc. since 2004. Prior to the CHRC, Etienne managed the St. Michael's Hospital (SMH) Health Sciences Research Centre in Toronto. Etienne guided SMH to become the fastest growing University of Toronto affiliated research center between 1994 and1997, acting as the signing officer on 350 externally funded clinical and basic research budgets, and overseeing the design, construction and maintenance of 27,000 square feet of clinical and basic research laboratories. During his tenure, Etienne developed a detailed understanding and methodology of the successful performance of clinical research within a hospital environment and became a member and Accredited Health Science Executive of the Canadian College of Health Service Executives. Etienne's educational background was rooted in his persistent interest in biology and he completed his academic career with an emphasis on human physiology, toxicology and zoology graduating from University of Toronto with high distinction in 1984. Etienne completed his graduate studies in 1986 with a Masters degree from the Faculty of Medicine, Department of Physiology, Centre for Research in Neurodegenerative and served as a peer reviewer for research publications and grant applications. Anatoly Langer - MD, M.Sc., FRCPC, FACC, Chairman of the Board Dr. Anatoly Langer graduated from the University of Manitoba in 1982 and completed his Internal Medicine and Cardiology training at the University of Toronto in 1987. He is a fellow of the American College of Cardiology and Canadian Royal College of Physicians and Surgeons. After two years as a Heart and Stroke Foundation Research Fellow he became a director of the Coronary Care Unit at St. Michael's Hospital in Toronto, Canada. In 1996 Dr. Langer founded Canadian Heart Research Centre with the goal of improving the care of cardiovascular patients through clinical trials research, physician and patient education and information sharing. Dr. Langer has over 250 peer reviewed publications, abstracts, and book chapters. His areas of interest and research include pathophysiology and management of acute and stable coronary syndromes as well as treatment and prevention of cardiovascular disease. More recently, Dr. Langer has been a keen participant in the development of electronic health record, web based applications for management of vital data and telemedicine. Since becoming a chair of the board of directors at a Canadian public company, CardioComm Solutions, Dr. Langer has championed the innovation for office and home based data acquisition and early disease management algorithms. Currently Dr. Langer is a Professor of Medicine at the University of Toronto and a staff cardiologist at St Michael's Hospital. He is a chair of the Canadian Heart Research Centre in Toronto.
Page 5 At the end of Q1-2016, CardioComm had approximately $40k in cash, and negative working capital of $0.7 million, with no debt. Q1 revenues were $0.37 million. The following table shows a summary of the company s recent financial performance. Key Financial Data (in C$); YE - Dec 31 2014 2015 Q1-2015 Q1-2016 Revenues 1,504,994 1,725,372 587,008 373,067 Net Income (954,899) (599,748) (389,878) (15,218) EPS (basic) (0.01) (0.01) (0.00) (0.00) Cash 174,744 98,184 69,802 40,271 Working Capital -662,627-707,453-536,609-703,476 Debt - - - - Assets 1,048,042 1,047,676 915,111 933,792 Revenues increased by 15% YOY to $1.73 million in 2015. In Q1-2016, revenues dropped by 36% YOY to $0.37 million primarily because the company had an unusually high single payment in the previous year (Q1-2015). The company s share price is currently $0.04 per share, reflecting a market capitalization of $4.59 million, and an enterprise value of $5.2 million. The current EV to revenue ratio is at 3.02x versus the Health Care Technology industry average of 4.2x. We currently do not have a fair value estimate or rating on the company s shares.
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