Covalon Technologies Ltd. (COV.V) researches, develops, and commercializes healthcare technologies. Covalon's has a number of patented technologies, products, and services that address the advanced healthcare needs of medical device companies, healthcare providers, and individual consumers.
COV.V's technologies are used to prevent, detect, and manage medical conditions in specialty areas such as infection control, vascular access, surgical procedures, advanced wound care, and medical device coatings.
Covalon has several lines of business including: a) advanced wound care (CovaWound, CovActive), b) vascular access ( IV Clear™,CovaView), c) preoperative care (MediClear™ and SurgiClear™), d) moisture barrier (AquaGard, AquaGard Glove, AquaGard Boot), and e) urology (SilverCoat™ catheters). Hence, the breath of these assets are self-evident.
COV.V is relatively illiquid at 25M shares with an average daily volume of 15,000 shares or so in the last three months. Roughly a year ago, Covalon was trading at around $5.00, a detailed weekly chart is available here.
Listed below are the releases issued in the past year.
Jan. 28 - Fiscal 2019 Year-End Results and Plan for Fiscal 2020.
In 2019, 70% of COV.V's revenue were from the US, 20% from the Middle East. Covalon also reported to have four product families that each account for 20% or more of its annual revenue.
Other key highlights included: a) Completion of product registration for Covalon’s flagship products in most Latin American countries (i.e. Mexico, Argentina, Chile), b) Initiation of distribution in 16 new countries, c) Currently working with one of the world’s largest medical device companies that licensed Covalon’s proprietary medical coating technologies and d) Four new products that we have yet to launch in our key market
Jan. 27 -Announces Conference Call to Discuss Year End and Fourth Quarter Financial Results.
Sep. 18 - Announce Closing of Non-Brokered Private Placement. - Approximately 2,75M units (each, a “Unit”) of the Corporation at a price of $2.00 per Unit for aggregate gross proceeds of approximately$5,50M; Warrant at $2.00.
Insiders participation: $4,35M or 79% of total funds raised. Proceeds to be used for general working capital, expanding international distribution channels, developing and commercializing new products, as well as, for the repayment of debt.
Sept 6 - Announces Re-Pricing of Private placement. August 1, 2019 Offering has been re-priced to accurately reflect the current market price. The Offering; 2,75M units at a price of $2.00 per unit, an 11% premium of the market price of the common shares as of the close of business on September 5, 2019, for aggregate gross proceeds of up to $5,500,000.
Aug. 27 - Announce Third Quarter Fiscal 2019 Results.
Aug. 1 - Announce Private Placement of up to $6.3 Million.
Jul. 25 - CEO Provides Corporate Update. - As previously disclosed, our contracted Saudi Arabian business will be more heavily weighted in our fourth quarter, which ends September 30, 2019. As a result, our Q3 results, which are due to be released at the end of August 2019, will not contain significant revenue from Saudi Arabia, and will therefore not result in a profit for the quarter.
Covalon recently discovered that a former sales executive was trying to take advantage of Covalon’s success in the Middle East by secretly attempting to use confidential information and intellectual property of the Company in a scheme to try to raise funding to build a factory in Saudi Arabia which if completed in a few years, would attempt to manufacture products similar to those offered by Covalon. Covalon successfully obtained a legal injunction prohibiting the former executive from competing with the Company, using Covalon’s proprietary information, and from interfering with the Company’s relationships with our customers and distributors.
May. 28 - Announces Second Quarter Financial Results.
May 27 - Announces Conference Call to Discuss Second Quarter Financial Results.
MediClear PreOp, the only dual antimicrobial pre-surgical film barrier, was designed to help hospitals reduce infections by protecting surgical sites on patients before a surgical procedure. Since Covalon’s launch of this innovative product, the medical technology industry has recognized MediClear PreOp with a number of awards.
Mar. 18 - Mr. Ron Smith joins Board of Director and is appointed Chair of Audit Committee.
Mar. 8 - Announces Voting Results from 2019 Annual and Special Meeting of Shareholders.
Feb. 26 - Announces First Quarter Fiscal 2019 Results and Updates plan for 2019.
Feb. 21 - Announces Conference Call to Discuss First Quarter Financial Results.
Summary
The last eight months have been difficult for the company in terms of earnings and valuation. The initial private placement had to be re-priced from $2.51 to $2.00 in part due to weak Q3 Earnings. Covalon was not able to raise the initial maximum ($6.3M) target but did raise $5.5M with $4.35M or 79% of the total financing from company insiders.
COV.V FY 2019 revenues were significantly better than 2018 ($34M vs. $26M YOY) but the company had a net loss of $9M vs. a profit of $1.6M in 2018. This is for the most part attributed to an increase in operating expenses ($30M vs. $18M YOY) which is primarily related to an increase in personnel costs (sales and Marketing) and new expenses from Aquagard and efforts to expand in Europe, US, and Saudi Arabia among others. Quarterly breakdown in top line earnings are as such.
Since reporting FY 2019 earnings, valuation has taken a hit in February. Keep in mind, COV.V previously stated possible "lumpy" or uneven quarterly revenue recognition due to "bulk shipment distribution". As reflected in the above chart, last week COV.V broke S1 ($1.64) and tested S2 ($1.42). Historically, COV.V has had previous drops in valuation prior to a negative earning report and judging by last year's issuance of Q1 results, an announcement could be any day.
However, a look at Level II (gross transactions) for the past three months indicates that BMO Nesbitt Burns Inc. (9) is increasingly absorbing a larger proportion of the total monthly volume. Going from roughly 23% in December 2019, to 71% in January 2020, to 87% February 2020 to date. It raises some questions but also suggests a contrarian perspective.
This week's forecast is significantly different from last week but it could also be similarly volatile. Buckle up!
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