HLIX Releases 2nd Quarter 10Q
Wow. They released the second quarter results yesterday during that big trading day. I wonder what time that occurred. I wasn't expecting this until next week.
This is in line with what I'm expecting. But to see the price tag of Cannabase on there is a nice treat. Wasn't expecting that. This may look pretty ugly on the surface to a lot, but not in my eyes. This is an aggressive expansion, and it's a pretty for a startup under these circumstances. It's actually stronger than what it may seem to some. I would not want Zac's job. I would be stressed. This is above my pay grade, but he's doing an excellent job. I love what I see here.
First off, Helix is growing its sales each quarter significantly. You have good operating leverage potential here, but it's not real clear to me. They have this huge variable cost in payroll, which is only going to increase with sales. But I'm sure it has to be a top heavy number, and it's the only number that's keeping them away from profitability. Plus they have "professional fees" in there which, backing those out, gets them real close to profitability. I'm guessing those are consulting fees and things of that sort to get them to the next level. So they have to ramp up those sales, and my target of $5M should get them there.
But what Cannabase will do to that could be huge. Based on Cannabase's purchase price of $400,000 (rounding up and including the "$50,000 investment from the quarter prior), Helix is definitely the bigger company. They can't be brining in more in sales that Helix, but they will add to the our sales. And what it does for Helix (and Jennifer and family) is gives Helix a huge customer base, a monopolistic base in place sorta. They can expand Cannabase's role and vice versa.
The two new partners, BioTrack and MJ, are indeed two force multipliers. These are like hammers. They are leverage. They are going to contribute to a revenue stream of Cannabase, but they are not a cost. And that's the beauty of it. How much so is a mystery to me. However, it improves margins, and thus Helix's operating leverage. And that is key to profitability, and that is why this is beautiful. It's also a stepping stone for both Helix and Cannabase into the other states where Biotrack and MJ already have a strong foothold. All 4 need each other, and all 4 are more powerful together than alone. The group is stronger than the individual.
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We actually have a book value way down there at 1 cent per share. But to have positive shareholder equity is a good thing. For a penny stock especially. And our working capital is in great shape. He ended the quarter with $150,000 in working capital, but at a high ratio. After making that purchase. To me, that's impressive and the company is in a strong position here.
They have a cash burn about the same as it was before, backing out the acquisition. There should be no fear here for a strong Series B candidate coming on board. Zach also holds the reigns of 94% ownership which is a clear signal to me he intends a secondary offering down the road and to relinquish lots of control without losing control. And he is already proving that his investments are accretive and not dilutive.
And then they have this APIC entry of almost $400,000 on the balance sheet which is additional paid in capital. That's what investors have put in for a share price over its par value to my understanding, and that to me is confidence in the prospects of this stock. That convertible note also expires at the end of 2017, as mentioned before, and that's a great time table. I can imagine seeing $5M in sales here easily by that time.
Overall, this is really good stuff. I needs a strong captain at the helm to pull this off, but I think we have that here. It's not going to coast on cruise control.
Cannabase, may also prove to bring in some more force multipliers in the near future. And that would just be icing on the cake. We shall see. Much more clarity won't be available until April of 2017. But the 3rd quarter will be more revealing and interesting. Right now, I'm sure they are busy with integration.
I would love any participants to bring their eyes and experience to the table, especially anyone with a strong background in finance.
