Seeking Alpha

MMJ Entrepreneur's  Instablog

MMJ Entrepreneur
Send Message
I cover entrepreneurial topics and investing topics related to the legal medical/recreational marijuana industry.
My blog:
Weed Entrepreneur
  • Weed Stock Spotlight: MediSwipe, Inc. 3 comments
    Dec 24, 2012 9:19 AM | about stocks: AGTK

    Previously in our series, Weed Stock Spotlight, we covered media darling Medbox, Inc. (OTCQB:MDBX) and AVTC, Inc. (OTCPK:AVTC); both of which many experts believe to be in good position to thrive with their innovative products as the legalization of use of medical/recreational marijuana spreads throughout the United States. So today, we'd like to switch gears a bit and talk about a smaller company, MediSwipe, Inc. (MWIP.OB), which isn't quite at the same stage of maturity in terms of market capitalization or media notoriety but nevertheless has huge potential in the coming months. To give you a snapshot, MediSwipe, Inc. stock price has surged recently as seen below, posting +650% gain in 3 months, +275% gain in 1 month, and ~44% in 5 days:

    (click to enlarge)

    Before we get into the nitty-gritty, let's back up and look at the consumer problem that this company is trying to solve.

    The Problem:

    Many companies are attempting to provide a remedy after one of the biggest credit card processing companies for the medical marijuana industry announced that they were withdrawing from the industry as of July 1, 2012. (They would be removing Visa and Mastercard as a viable payment option) Their withdrawal further fuels a fire that had already been burning after a American Express payment processor told medical marijuana dispensaries that they are no longer offering payment-processing service in 2011.

    Dispensaries and related businesses seemingly had nowhere to else to turn but cash now... However, in this digital age, obviously it's a serious inconvenience for business owners and patients/consumers alike. Business owners take a significant amount of risk when they have thousands of dollars on hand at a business, no matter what industry. It's especially not comforting that one particular insurance company in the medical marijuana industry states the #1 insurance claim in the industry happens to be theft. (Many insurance companies make clients install high-end surveillance systems as a requirement for coverage as a result)

    Cash Isn't Necessarily The Undisputed King

    Cash is all good and fine when dealing with the black market marijuana industry; but business owners and consumers alike, with medical prescription data and complex inventory management systems, benefit from having a paper trail and flexibility of being able to pay via credit card. Additionally, the progression of payment processing via smart phones is also looming on the horizon potentially pushing cash more and more into the corner and out of use...

    The "Green" Opportunity

    MediSwipe, Inc. wants to fill the hole that other major credit card processing companies left by offering:

    A complete line of merchant services for your medical dispensary business including, Visa, MasterCard & merchant accounts, debit & credit card transaction processing, gift/loyalty card programs and POS terminals. We understand your business, and work with private banking institutions that will streamline the application process and have you accepting credit cards with 5 business days. With MediSwipe, we can tailor a transaction processing solution to meet your needs.

    MediSwipe, Inc. isn't the only company out there that is willing to navigate the treacherous terrain of payment processing in the medical marijuana industry; but they are certainly swinging for the fences by being one of the few, if not the only, publicly company with a primary function of payment processing for this industry. Of course, there's some pros and cons to being publicly traded, so let's take a look at some of the data points when considering an investment in MediSwipe, Inc.

    The Pro: Identification of Trends

    Fundamentally, upon examining their website documentation, we like the fact that MediSwipe has identified two major trends in the industry: loyalty/reward cards, mobile couponing and mobile payment solutions. Being able to handle both of these transactions as the medical marijuana industry matures is a huge upside. Their subsidiary company, 800Commerce, provides these solutions to a variety businesses with white label privileges. They are sticking their necks out for medical marijuana business owners by coming into a scenario that previous credit card processing companies refused to do business and we think these business owners won't forget it.

    The Con: Financials

    The company still isn't profitable, with a 9-month ending net loss as of September 30, 2012 of ($330,388). However, revenue is up from 2011 to 2012 at $35,222 and $50,239 respectively. The market cap and daily average volume is not attractive to most, as they are considered a nanocap, or penny stock, with an average of about $140,000/10.8mn shares traded daily and market cap is right around $6.4mn at the time of writing.

    MediSwipe, Inc. has quite the liquidity problem as it attempts to grow and develop bigger and better technology solutions for businesses and the 10-Q further elaborates on that by stating that they will need to raise money in the future to continue doing business. The CEO has had to loan the company money in the past, as well, which can be viewed as good and bad. On one hand, you have an executive that believes in the business enough to put some "skin in the game" but you also have to wonder why they are having trouble securing more funding elsewhere if this business truly "has legs".

    The 10-Q also mentions their accumulated deficit of $4,766,517, which management states is an "ongoing concern about whether or not they can continue operation". Although the numbers do look a little scary at first glance, keep in mind this is a budding technology company that deals with expensive development.

    Conclusion:

    Much like the other stocks we have covered in the medical marijuana industry, the company is dealing with the same predicament of federal law vs. state law grey area as well as a lack of sound financial numbers. However, also very much like the other companies we have identified, they have huge potential if the company can continue to keep up with the trends associated with payment processing and establish a competitive advantage with their technology.

    Additionally, MediSwipe, Inc. is going to have to come up with better ways to receive funding in the future. We definitely understand that you have to do what you have to do, so to speak, to fund a business, but personal loans from the CEO and "the unsecured convertible debentures from unaffiliated investors which may cause dilution to shareholders" are not going to cut it in the long-term if business grows substantially.

    It will be interesting to watch in the next few months if any announcements of more businesses using 800Commerce payment solutions will generate some cash from investors and they can start to close their accumulated deficit gap. If this scenario starts to happen, we can definitely see MediSwipe, Inc. getting a lot more (positive) attention from the media and we think it will be added to a lot more watch lists. We look forward to keeping an eye on MediSwipe, Inc. and perhaps consider a potential investment in the next 3-6 months if the financial conditions improve and the company successfully increases revenue in the next couple of quarters.

    MediSwipe, Inc's most recent 10Q can be found here for further research

    Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Back To MMJ Entrepreneur's Instablog HomePage »

Instablogs are blogs which are instantly set up and networked within the Seeking Alpha community. Instablog posts are not selected, edited or screened by Seeking Alpha editors, in contrast to contributors' articles.

Comments (3)
Track new comments
  • bluefin646
    , contributor
    Comments (76) | Send Message
     
    Great summary about MWIP.

     

    A few points:

     

    MWIP is currently rolling out a digital medical records app they will charge ~$20 per user/per year, as most patients do not want their personal medical records on file, for obvious reasons. To ease the burden of the cost, some dispensaries will choose to offer a $20 credit to the individual to offset the yearly cost.

     

    Also, the $5mln NOLs, Net Operating Loss, to date, although perceived as a negative for current investors, most realize this will be a huge positive once MWIP turns positive in 2013. As the first $5mln in profits will float right to the bottom-line.

     

    Thirdly, as other MM companies have attracted investors, most have appreciated to a $35-60mln market cap, this would put MWIP in a range of $0.075-$0.12ish, still substantially higher from current levels.

     

    Fourth, most potential investors incorrectly assume that MWIP and the entire MM sector need Federal Law to change to make money, this is factually wrong. Federal Law changing only makes the sector grow that much quicker in the near-term from a stock appreciation stand point as more investors 'feel comfortably' as no longer 'against the law'. However, the growth of these businesses has and WILL continue in the foreseeable future. We are currently at 19 states legalizing some form of MM (medical marijuana) with another 15-18 potentials in the next 24 months, with two states OUT RIGHT legalized current casual marijuana use, Colorado and Washington.

     

    Lastly, EVERYONE is aware of the budget issues around the country, both Federal and State short-falls. There is a massive growing voice from politicans to legalize so they can collect 'their fair share' from a tax perspective.

     

    Merry Christmas! And Happy New Year to ALL!
    24 Dec 2012, 01:47 PM Reply Like
  • MMJ Entrepreneur
    , contributor
    Comments (23) | Send Message
     
    Author’s reply » 1. That's a really nice perk for MWIP because then they are probably going to see higher rates of usage, meaning more revenue...

     

    2. Agreed, and with recent revenue stories, it looks like they are doing quite well towards reaching profitability/break-even in 2013.

     

    I think your post does an excellent job of hitting on a lot of positive points for MWIP and I personally share a lot of the same sentiments that as it grows, both revenue and share price wise, it very well could be seeing more triple digit gain surges like we've seen recently.

     

    Merry Christmas and Happy New Year as well!
    24 Dec 2012, 02:25 PM Reply Like
  • bluefin646
    , contributor
    Comments (76) | Send Message
     
    Stock hit 3c on friday
    6 Jan 2013, 10:55 PM Reply Like
Full index of posts »
Latest Followers

Latest Comments


Posts by Themes
Instablogs are Seeking Alpha's free blogging platform customized for finance, with instant set up and exposure to millions of readers interested in the financial markets. Publish your own instablog in minutes.