Advanced voice telecommunication and music streaming eyewear may seem like something only Skymall could sell, but Energy Telecom Inc. (OTCQB:ENRG) has identified an interesting new market for the technology that could represent a key turning point for the company - the industrial workplace. Eyeglasses are primarily worn for protection in these markets, with ongoing communication being vital with other team members.
In early December, Honeywell International Inc.'s (NYSE:HON) Honeywell Safety Products division unveiled its UVEX AcoustiMaxx as a solution for workplace safety and communication, combining maximum protection with hands-free voice communication. The solution enables workers in remote or noisy environments to focus on the task at hand and remain protected and in contact with their teams at all times - potentially generating significant value.
The fruits of this contract have yet to appear in the company's financial results. During the third quarter of 2012, the company reported revenues of just $17,784 and a net loss of $222,845, or about $0.03 per share. But, judging by the firm's recent letter to shareholders, the Honeywell agreement could be big. Founder Tom Rickards noted "we expect that in 2013, we will generate sustained revenues, and with careful guidance, may achieve profitability on a quarterly basis."
Meanwhile, the company's balance sheet remains strong for a micro cap stock. With cash of $142,891 and total assets of $167,681, the firm has positive shareholders' equity of $72,538, and it only modestly expanded its share count over the prior year. The balance sheet may have also been strengthened with a new forward-looking "Zone of Safety" patent (13,713,789) that provides for new technologies never before found on the human head.
Looking ahead towards the long-term, RedSeer Consulting estimates that the Protective Personal Equipment (PPE) market could reach nearly $16 billion by 2015, growing at a 5.8% clip between 2005 and 2015. Protective eyewear accounts for approximately 6% of this market, which yields a market niche that's expected to reach about $960 million. Capturing just a fraction of this market could product strong revenues for the company.
Of course, there are also many risks that investors should carefully consider. Micro cap stocks tend to have less liquidity than larger stocks, meaning it may be more difficult to buy and sell the stock at reasonable prices. Meanwhile, micro cap companies also have a more difficult time obtaining financing and may have "going concern" notices attached to them by their auditors - meaning their history of losses cause doubts about their ability to remain in business.
That said, with a market capitalization of just $4.3 million, investors won't need to capture much of the eyewear PPE market in order to see returns. Risk to investors (e.g. the "going concern" notice) could also significantly decline once the company reaches sustained profitability and dilution may also be sharply reduced. While the firm's products may seem a little strange, these events may warrant investors taking a closer second look at the stock at these levels.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.