For a couple of weeks now, I have been seeing the ticker for GlassesOff Inc. (OTCQB:GLSO) on and off the most active list on the OTC Markets. Unfamiliar with the symbol, I thought that I should take a quick look at it. A cursory review raised my eyebrows, and I turned away. But, now that there is more discussion going on, and some bullish commentary being published, I wanted to share some additional information that I believe is being left back, and follow through the thought process of the company's prospect.
This article will give a brief history of the company, the research supporting the company's claims, an overview of the product and company financials, and my opinion of the stock's outlook. Longs are not going to like this.
The company is a newly formed entity effective July 30, 2013. It is the result of a merger between Autovative Products and Ucansi Acquisition Corp. The company did a 7.5 for 1 forward spilt payable on August 2, 2013. In accordance with the merger agreement, all of the outstanding shares of Ucansi's common and preferred stock were converted into the right to receive an aggregate of approximately 40,000,000 shares of common stock of GlassesOff. At the time of the merger, these shares were unregistered. Effective December 5, 2013, the company filed a registration statement/prospectus (S-1) announcing the offering of shares from existing shareholders on a continual basis (from time to time).
The company has one product; the GlassesOff App, available in the Apple App Store. The company claims the app is suitable for anyone that is experiencing the "natural effects of aging on near vision when reading", anyone that anticipates deteriorating vision in the future, and anyone that experiences "blurred near vision, eye strain, fatigue or headache when reading". In short, this app is for everyone.
The basis of the application is "scientifically proven technology" published in "leading scientific journals." The company, in press releases and on it's web site, have cited this article.
The Science Behind the App
To summarize the article and the science supporting the GlassesOff App: Research has shown that through proactive and reinforced feedback, people can train their brain to recognize the blurry characters in small font print more effectively. There is, however, no evidence that any such exercises or games will clear the vision of aging eyes and restore clarity to 20/20 vision. To quote from the article:
Our results, consistent with previous studies, show that perceptual learning can improve visual acuity and contrast sensitivity in persons with presbyopia, and in some cases, result in performance levels similar to the young control group. Moreover, here we show that training also improves suprathreshold contrast discrimination and reading speed for small letters. Our study is the first to show conclusively that these improvements are not due to improved optical performance of the eye (accommodation, pupil size or depth of focus). - (emphasis mine)
So, what exactly does the research prove?
The effects of training show that the visual system has the potential to operate on the blurred input to reestablish the normal "pre-presbyopic" level, matching the processing of the young group and achieving normal or near normal visual performance for low spatial frequencies and suprathreshold contrasts.
So much for the promise that user will be able to throw away their glasses permanently after playing (and paying for) the GlassesOff game. Now, don't take that statement as doubt the App does not work, and that users will not perceive benefits from using it. At this time, we have very little consumer feedback to support or deny the benefits that could be realized from staring at your iPhone for an extra 15 minutes, three times a week.
Of course, this begs the question of why do we not have any feedback. The obvious answer would be that the app was just released. This press release officially announces the release of the iPhone app on December 10, 2013. But, since it was not released until 12/10, from iTunes reviews, we can disregard these two review as they are obviously promotional due to their 12/9 date.
The remainder of the reviews would therefore be applicable to the current version of GlassesOff available.
So far, it doesn't look too good. It looks like none of these consumers are happy, because they cannot get this version of the app to work. But what about prior versions? Yes, I said prior versions. According to these articles, GlassesOff has been around a while:
However, try as I might, there does not seem to be any additional information available on prior versions on iTunes. And, since the app is not yet available to Android, I have no way of capturing consumer feedback through that platform. So, other than attestation from the company, we have no way of knowing if this app is any good.
Product Comparison - GlassesOff vs Glasses
Ok, lets take the above information on consumer reviews, and how long the product has been available all with a grain of salt and do a simple comparison. Right now, the app is available free, on a two week trial basis. After that time, consumers will have the option to upgrade to the full version for $59.99. (However, during this promotional period, users can upgrade for only $10.) Following completion of the training, there are ongoing maintenance fees on a monthly basis. That gives us a total cost to consumers between 80 and 100 dollars a year, depending on what those monthly maintenance fees would be. (I didn't find where they are disclosed by the company.)
For that price, consumer could alternatively purchase 8 to 10, possibly more, pairs of reading glasses. There is a copious selection of frames and strengths available at your local Walgreens (NYSE:WAG), CVS (NYSE:CVS), Target (NYSE:TGT), Walmart (NYSE:WMT), you name it. And that doesn't include the different styles available online through retailers like Amazon (NASDAQ:AMZN), Overstock.com (NASDAQ:OSTK), or even specialized sites like Readers.com.
Granted, I'm a little biased since I've been wearing glasses since Jimmy Carter was in the White House. But with the promise that the GlassesOff App will only allow you to interpret blurry images a little better as opposed to permanently eliminating the need for glasses, contacts, or corrective vision surgery, it seems the rational consumer choice would be to embrace the inevitability of aging and accessorize your appearance using stylish reading glasses. Of course, I have not tried the App, and admittedly feel in no way compelled to try it, since my astigmatism cannot benefit from the product.
Alright, so far we've determined that the GlassesOff App will not really fix your eyes, and although it is available on the iPhone, apparently doesn't run, and that total cost for the app is much more expensive that buying a pair of reading glasses. But, prior biases aside, how do the company's financials look?
Because of the merger between Autovative Products and Ucansi Acquisition Corp., one cannot compare prior quarter financial statements to the latest quarterly numbers effective September 30, 2013. We do know that the company had just over 2.5 million in assets as compared to 600 thousand in outstanding liabilities. There were however, no revenues and a burn of over 800 thousand dollars due to administrative and operating expenses. And, all of the cash on the balance sheet can be attributed to the issuance of stock and warrants from the statement of cash flows.
That is not to say that the company cannot begin generating revenue over the next couple of quarters. All it needs to do is capture a few hundred thousand dedicated customers that don't mind paying ongoing maintenance fees. That's of course provided the company can fix the current version of the app and convince consumers that it is worth 10 to 15 times the cost of a pair of reading glasses to purchase the ongoing service.
Aside from these, I will refrain from further comment on the company financials until future reports provide enough data for comparative analysis of operations.
Although I have not found any evidence of stock promotion, it seems that there is more interest in the business model (the stock) than there is in the product. I would not be surprised to find in the near future, paid analysis of the company and forecasts of outperforming stock price. I also would not be surprised to see additional bullish articles making reasonable sounding assumptions of consumer market targets and sales projections. However, I am skeptical enough at this point to think that the majority interest at the company would be to keep the stock price high enough to recapture the initial $1.25 per share cost by selling the newly registered securities in the open market. (Remember that prospectus I mentioned in the beginning?)
In summary, this company's product is way too expensive for the benefit it provides. Once consumers realize it, they will either drop the product or avoid it all together and seek more rational uses for their dollars. Therefore it is in the best interest of shareholders to walk away with whatever they can get.