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

We plan to derive most of our future revenue from product sales and development services of our imaging equipment and our flagship ScoutCam™ and its future applications. Our future growth and success is dependent on the successful commercialization of the ScoutCam™ system.

So going forward it seems that the company is betting on the ScoutCam and the participations in the online marketing companies. We contacted management for the rationale of the Algomizer/Linkury deals and it seems to be twofold:

  • To use the cash of the company in order to generate a return as to reduce cash burn.
  • To use the experience of the management team in order to make Linkury a publicly traded company.

Well, we have to wait and see how this goes.

Figures

Here is an overview of the last five years:

Chart

Data by YCharts

Not a whole lot in terms of revenue, and some operational deterioration. Here is how the sales split out (20-F):

What are these development services? Well, from the 20-F:

The increase in revenues from development services was primarily due to:

  • (I) during the year ended December 31, 2018 we recorded revenues for development services provided to a customer in the amount of approximately $130,000 (see ‘Customer A’ in note 17d to our financial statements for the year ended December 31, 2018). We did not receive any revenue from this customer during the year ended December 31, 2017; and
  • (II) during the year ended December 31, 2018 we recorded revenues for development services provided to a customer in the amount of approximately $87,000. We did not receive any revenue from this customer during the year ended December 31, 2017.

Net cash used in operating activities for the year ended December 31, 2018 was $4.2 million, an decrease of $0.5 million, compared to net cash used in operating activities of $4.7 million for the year ended December 31, 2017

Financing

Given the substantial losses and cash bleed, the company regularly resorts to financing:

Chart

Data by YCharts

And there is more on the way in the form of the warrants (20-F):

As of March 25, 2019, the following warrants are outstanding:

  • Unregistered warrants to purchase an aggregate of 990 ADSs at an exercise price per ADS of $57.50. These warrants expire on September 8, 2021.
  • Unregistered warrants to purchase an aggregate of 10,469 ADSs at an exercise price per ADS of $36. These warrants expire on June 6, 2022.
  • Unregistered warrants to purchase an aggregate of 998 ADSs at an exercise price per ADS of $29.48. These warrants expire on December 6, 2021.
  • Warrants to purchase an aggregate of 535,730 ADSs at an exercise price per ADS of $14. These warrants expire on March 29, 2022.
  • Warrants to purchase an aggregate of 37,501 ADSs at an exercise price per ADS of $17.5. These warrants expire on March 29, 2022.
  • Unregistered warrants to purchase an aggregate of 101,251 ADSs at an exercise price per ADS of $9. These warrants expire on May 27, 2023.
  • Unregistered warrants to purchase an aggregate of 14,177 ADSs at an exercise price per ADS of $10. These warrants expire on November 24, 2022.
  • Warrants to purchase an aggregate of 3,263,325 ADSs at an exercise price per ADS of $3.50. These warrants expire on July 18, 2023.
  • Unregistered warrants to purchase an aggregate of 198,637 ADSs at an exercise price per ADS of $4.375. These warrants expire on July 18, 023.

The biggest  of these are the Series C (penultimate in the list above) which are trading on Nasdaq under the symbol “MDGSW” since July 2018. So there is at least 4M+ potential additional shares coming via warrant conversion, although the conversion would also bring in quite a bit of cash.

Conclusion

While it remains to be seen how the Algomizer/Linkury participations will play out, the decision to focus on the ScoutCam seems right on the mark and that's off to a flying start this year. 

The ScoutCam can be used into many more markets and applications and this is rapidly proving itself out, with orders piling in. While the company has just a $7M market value, they seem to have a very interesting piece of technology and the $3M Chinese license deal for MUSE will keep the company going for a while.

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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.