E Medigus, A High-Risk, High-Reward Micro-Camera Play

First off, until the company actually manages to sell the MUSE business, they keep on developing it and actually with some success of late:

In addition to that China deal, they are also looking for similar deals elsewhere. The decision to sell the business probably makes sense:

  • The company lacks the resources to build a global sales, marketing and distribution network.
  • Even if sold off, it can still capture significant value as their ScoutCam are a crucial part in the MUSE system.

Here is some further clarification on the strategy for the MUSE going forward (20-F):

As part of our board of directors decision to examine potential opportunities to sell our MUSE ™ technology, or alternatively grant a license or licenses for the use of the MUSE ™ technology, our board of directors has reexamined the efforts and resources currently invested by us in our MUSE ™ technology distribution agreements as well as the revenues obtained through such agreements in order to assess their financial viability. As a result of this analysis, our board of directors resolved to terminate our distribution agreements, except for our distribution in China, in order to redirect our resources to securing licensing agreements, which may in turn generate significant income in the short term, reduce operating expenses and lower the Company’s burn rate

Other sectors

The company seems to pursue other activities:

  • Taking a stake in an online marketing company.
  • Announcing interest in the CBD and medical cannabis industry.

On March 19 this year the company entered into an agreement with an Israeli online marketing company Algomizer in the form of a $5M investment, from the PR:

Medigus to invest NIS 5.4 million directly in Algomizer Ltd., which is engaged in field of internet advertising and whose shares are traded on the Tel Aviv Stock Exchange Ltd. The investment will be made at a price per Algomizer share of NIS 4.15. Medigus will invest an additional NIS 9 million through a direct acquisition of the shares of Linkury Ltd. from Algomizer, at a company valuation of Linkury of approximately NIS 96 million. Medigus will further invest an additional $1 million in Algomizer through equity exchange by issuing Algomizer American Depositary Shares (ADRS) at a price of $3 per ADR in consideration for Algomizer shares based on a price per Algomizer share of NIS 4.15.

In addition, Medigus will issue Algomizer warrants to purchase ADRs in an amount equal to the ADRs issued to Algomizer, at an exercise price of $4 per ADR. Furthermore, Algomizer will make its best effort to list its shares on a national stock exchange in the U.S.

That's a substantial participation, Medigus will hold 17.9% at Algomizer Group and the deal is supposed to close next week. One reason for the participation might be (20-F):

We have a limited sales and marketing infrastructure and have limited experience in the sale, marketing or distribution of products. To achieve commercial success for any product for which we have obtained marketing approval, we will need to establish a sales and marketing infrastructure or to out-license our products

It makes more sense in relation to their efforts of selling their MUSE business though. Management also argued in the 20-F that it expects to derive significant value from the participation, but in the same breath argued that there are no guarantees, not even for a successful completion of the transaction.

But there is more, the company also  (from company PR):

announced today that it has entered into a binding memorandum of understanding with Linkury Ltd., a leading company in the field of online advertising, which is wholly owned by Algomizer Ltd. (TASE: ALMO). As part of the memorandum of understanding Linkury will establish a commercial technological platform for the manufacturing, marketing and distribution of cannabidiol based (CBD) products. In addition, the two companies will examine entering into a definitive agreement and the formation of an international advertisement company, which will carry out the joint venture... the manufacturing, operation, and regulation related to the CBD products will be carried out by Meidgus. The companies will jointly invest up to $500,000 in the venture for infrastructure and marketing and will own it in equal parts. This is Medigus’ first investment in the field of CBD, after announcing on February 14 that it intends to enter the CBD and medical cannabis markets. 
 

Without much further information it is difficult to assess the potential here. In any case, the upshot of the strategy change is summed up (20-F):

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Disclosure: This article is part of a new “UnderCovered” series of exclusive articles featuring companies with limited coverage. Authors are compensated by TalkMarkets for their time, and ...

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Comments

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Joe Black 1 year ago Member's comment

Interesting company, but still waiting for it to recoup where it was just last month. It's been a bit up and down since then.

Shareholders Unite 1 year ago Author's comment

Yep, they have some interesting technology which is applicable in numerous situations.

Investment Advisor 1 year ago Member's comment

Sounds like good things are on the horizon for this company.

Barry Hochhauser 1 year ago Member's comment

Frist I'm hearing of this company, but it sounds like they are on the cutting edge of some impressive stuff! Taking a closer look at $MDGS.