Linda Rogers has written a Feb. 29, 2016 article about a Vancouver-based company rather perturbingly titled ‘What’s Propelling Nanotech Security Corp to Decline So Much?‘ for Small Cap Wired,
The stock of Nanotech Security Corp (CVE:NTS) is a huge mover today! The stock is down 3.23% or $0.04 after the news [Nanotech Security announced its first quarter fiscal 2016 results in a Feb. 29, 2016 news release], hitting $1.2 per share. … The move comes after 7 months negative chart setup for the $68.48M company. It was reported on Feb, 29  by Barchart.com. We have $1.06 PT which if reached, will make CVE:NTS worth $8.22 million less.
The Feb. 29, 2016 Nanotech Security news release (summary version) highlights the good news first,
- Revenue of $1.5 million consistent with the same period last year. Security Features contributed revenues of $569,000 largely from development contracts and Surveillance delivered $940,000.
- Gross margin improved to 50% up from 34% in the same period last year. The improvement reflects the increased mix of higher margin Security Features revenue.
- Renewed a $1.0 million banknote security feature development contract. The Company successfully renewed the third and final phase of a banknote development contract with a top ten issuing authority to develop a unique Optically Variable Device (“OVD”) security feature for incorporation into future banknotes. The final phase is expected to generate revenues of approximately $1.0 million.
- Signed new $3.0 million KolourOptik™ banknote development contract. The Company signed a new three phase development contract to use the KolourOptik™ nanotechnology to develop a unique OVD security features with another G8 country for incorporation into future banknotes.
- Strategic meetings with large international banknote issuing authority. The Company continues to work with a large international banknote issuing authority to deliver a significant volume of colour shifting Optical Thin Film (“OTF”), and partner with our KolourOptik™ technology. Management continues to devote a significant amount of time and resources in advancing these opportunities.
- Signed a Memorandum of Understanding (“MOU”) with Hueck Folien, a European manufacturer to supply OTF to the banknote market. The MOU contemplates an operational agreement to collaborate in the volume production of a colour shifting OTF security feature. The OTF product is anticipated to initially be used in banknotes as threads and then expand into other markets in the future.
Doug Blakeway, Nanotech’s Chairman and CEO commented, “These two development contracts are material achievements. Issuing authorities are paying us – something not common in the industry – to design unique banknote security features with our OTF and KolourOptik™ technologies.” He further added, “Nanotech’s team has scaled the Hueck Folien production facility to where we believe together we can provide the initial volumes demanded by a top-ten issuing authority. Our relationship with Hueck Folien continues to funnel security feature opportunities to Nanotech.”
The company’s sadder news can be found in their seven-page Feb. 29, 2016 news release (PDF). Their net earnings for the final quarter of 2015 and 2014 were both losses but in 2014 their loss was (931,271) and in 2015 it was (1,746,335). Still, the company’s gross profit from revenue for the same time periods was 50% in 2015 as opposed to 34% in 2014 despite slightly less revenue in 2015.
Assuming I’ve read this information correctly, Nanotech Security does seem to be in a fragile situation but that can change. After all, IBM was in serious trouble for a number of years during the 1990s when there was even talk the company might go bankrupt. As far as I’m aware, IBM is no longer in imminent danger of disappearing from the scene. *ETA March 9, 2016: It seems I used the wrong example if Robert X. Cringley’s March 9, 2016 article ‘What’s happening at IBM? (It’s dying)‘ for Beta News is to be believed.)* Getting back to my point, companies do go through cycles and it can be difficult to determine exactly what’s happening at some of the earlier stages.
Certainly, Cantor Fitzgerald Canada analyst Ralph Garcea has an optimistic view of Nanotech Security’s prospects according to a March 1, 2016 article by Nick Waddell for cantech letter,
Nanotech Security (TSXV:NTS) offers a better and more secure solution in multiple market segments that together are worth billions of dollars per year, says Cantor Fitzgerald Canada analyst Ralph Garcea.
This morning [March 1, 2016], Garcea initiated coverage of Nanotech with a “Buy” rating and a one-year price target of $2.50, implying a return of 110 per cent at the time of publication.
Garcea notes that Nanotech has already created solutions for the consumer electronics, brand identification and currency segments. He points out that one of the company’s biggest differentiators is that its solution can be embedded onto almost any material. This is important, he says, because it means that security can be embedded into places it previously could not go, such as directly onto a pharmaceutical pill.
Shares of Nanotech Security closed today [March 1, 2016] up 2.5 per cent to $1.22.
I have written about Nanotech Security frequently and believe the most recent is a Dec. 29, 2015 posting. For those unfamiliar with the company’s technology, it’s based on the structures found on the blue morpho butterfly. The holes in the butterfly’s wings lend it certain optical properties which the company mimics for its anti-counterfeiting technology.
One final comment, I am not endorsing the company or any of the analysis of the company’s financial situation and prospects.