Level Brands Inc. (NYSE American: LEVB), an innovative marketing and licensing company that provides bold, unconventional, and socially responsible branding for leading businesses, announced April 12 a five-year licensing deal with Dynasty Group USA, one of the largest American-owned manufacturers of high-quality, cruelty-free cosmetic brushes.
The Backstory: The deal provides for licensing under three brands either owned or managed by LEVB: Ireland Men One (I’M1), Level Brands’ men’s-lifestyle brand; Beauty & Pin-Ups (BPU), Level Brands’ hair-care and disruptive women’s-products brand; and David Tutera, a brand managed by Level Brands’ Encore Endeavor One (EE1). BPU will license its brand to Dynasty for sale of cosmetic and make-up items, I’M1 will do likewise for men’s grooming brushes for facial hair and shaving kits, and David Tutera will license its brand for women’s makeup brushes and men’s grooming brushes for facial hair and shaving kits. The agreement provides for an annual marketing fee for each entity and royalty payments of 25% of gross sales until a threshold is met, and then 16% of gross sales from that point on.
Why It Matters: Deals such as this one fulfill the vision of Level Brands to enter win-win agreements with companies that share the values of Level Brands, that produce great products, and that can benefit from the marketing and licensing power of Level Brands.
Key Quote: “The deal furthers the goal of Level Brands to enter into synergistic agreements with carefully vetted and quality-committed suppliers,” said Stephen Roseberry, President of I’M1 and EE1.
Disclosure
(Level Brands [NYSE: LEVB] is a client of RedChip Companies. LEVB agreed to pay RedChip a monthly cash fee and 5,000 shares of Rule 144 stock for four months of RedChip investor awareness services.)
Digital Ally (NASDAQ: DGLY), which develops, manufactures, and markets advanced video-surveillance products for law enforcement, homeland security, and commercial applications, reported last week its operating results for 2017. While overall revenue was off year-over-year because of increased pricing pressures, there were several bright spots that bode well for 2018 and beyond, most notably, strong growth in recurring revenue streams for warranty services and cloud storage.
Why It Matters: As a B2B technology provider with large average sales, revenue can fluctuate in the short term more than is the case with other types of business. By building its recurring revenue streams, over time DGLY should be able to reduce quarter-on-quarter sales volatility.
Key Quote: “We are pursuing several new market channels that do not involve our traditional law-enforcement and private-security customers. If successful, we believe that these new market channels could yield recurring service revenues for us in 2018 and beyond.” – Stanton E. Ross, CEO
What’s Next: Last week’s earnings report also highlighted the company’s recent deal with NASCAR and its plans to expand into channels outside law enforcement and private security, as well as an update on various patent-infringement cases currently underway. Positive developments on any of these fronts could provide a big boost to DGLY shares.
Disclosure
(Digital Ally, Inc. [DGLY] is a client of RedChip Companies, Inc. DGLY agreed to pay RedChip Companies, Inc., a monthly cash fee for four [4] months of RedChip investor awareness services.)
KNOT Offshore Partners LP (NYSE: KNOP), which owns, operates, and acquires shuttle tankers under long-term charters in the offshore oil production regions of the North Sea and Brazil, announced today that its Board of Directors has declared a quarterly cash distribution with respect to the quarter ended March 31, 2018, of $0.52 per unit.
This corresponds to $2.08 per outstanding unit on an annualized basis. This cash distribution will be paid on May 15, 2018 to all unit holders of record as of the close of business on May 2, 2018.
Disclosure
(Knot Offshore Partners [NYSE: KNOP] is a client of RedChip Companies, Inc. KNOP has agreed to pay RedChip Companies, Inc. a one time cash fee for media and advertising services.)
Spectrum Pharmaceuticals (NASDAQ: SPPI), a biotechnology Company with fully integrated commercial and drug-development operations with a primary focus on hematology and oncology, presented positive data from its preclinical and clinical studies evaluating poziotinib in HER2 exon 20 mutations in non-small-cell lung cancer (NSCLC) at the American Association for Cancer Research (AACR) conference that just wrapped up in Chicago this week.
Key Quote: “These data build upon previous results from poziotinib studies and indicate that this drug could be effective in treating both EGFR and HER2 exon 20 mutations. Furthermore, new data from MD Anderson reveal that these mutations are found across a variety of solid tumors, and there is strong rationale for evaluating poziotinib in a basket study.” – Joe Turgeon, President & CEO
What’s Next: Spectrum currently markets six hematology/oncology drugs and has an advanced-stage pipeline that has the potential to transform the Company. Spectrum's strong track record for in-licensing and acquiring differentiated drugs and expertise in clinical development have generated a robust, diversified, and growing pipeline of product candidates in advanced-stage Phase 2 and Phase 3 studies.
Reflective of its rapid growth, New Age Beverages Corporation (NASDAQ: NBEV) in FY2017 reached gross revenue of $56.7 million, an increase of 107% over the previous year, the company reported 17 April in a press release. The healthy functional-beverage corporation announced an EBITDA of $5.2 million, an increase of only about 4% over the previous year. Exclusive of various non-recurring expenses associated with the three acquisitions the company made in FY2017, the EBITDA reflects an increase of 2,344% over FY2016.
Key Quote: In the release, Brent Willis, Chief Executive Officer of New Age Beverages, said, “2017 results were excellent, but we know we have so much more potential and opportunity. We acquired and integrated three companies in the year and uplisted onto the NASDAQ, in addition to hundreds of other things to build the foundation of a much bigger-scale company.”
The Backstory: New Age Beverages Corporation describes itself as “a Colorado-based healthy functional-beverage company” whose aim is “to create a one-stop-shop solution for retailers and distributors providing healthier beverages in the disruptive-growth segments of the $870 billion-dollar non-alcoholic beverage industry.” New Age claims to be the world’s “54th-largest beverage company, the eighth-largest healthy-beverage company, and the fastest growing.” The Company's various brands can be found in all 50 states and in more than 10 countries, the Company said.
While small-caps have been tracking larger-cap stocks during the market rally of the past few years, some analysts believe small-caps are primed for outperformance should recent tariff talks spark a trade war.
As more domestically focused businesses, small-caps can often adjust more nimbly to challenges.
The potential for Fed rate hikes this year also bodes well for small-caps. Historically, small-caps perform well in periods of rising interest rates.
The inefficiencies of the small-cap markets are often the source of the biggest gains. An investor finds the right stock, with the right team, in the right industry, when no one else is looking. That’s when the big returns can be made.
Those are the types of opportunities we strive to find here at RedChip.
A piece in Barron’s shows that even when small-caps behave similarly to large-caps, certain parts of the small-cap market still can show extreme sensitivity to ripples in the market.
In “Real-time Analysis,” a column by Brett Arends, the Barron’s writer notes that while both the S&P Small Cap 600 and the large-cap S&P 500 index were up 2% for the week ending Friday, April 13, small-cap energy stocks were even bigger winners.
“The S&P 600 Energy index … [ended] the week 10% higher,” Arends wrote. “[Small-cap energy stocks] are riding the rise in oil prices that is being driven, in large part, by issues surrounding Iran and tension in the Middle East.”
Note that Arends wrote before the United States, France, and the United Kingdom carried out on Saturday, April 14, a series of military strikes against government sites in Syria, in response to the suspected use of chemical weapons by the Syrian regime.
As tensions and uncertainty rise even higher, we’ll see whether those earlier ripples turn into shocks. Will fuel prices continue to rise, and will the rise continue to propel upward the price of small-cap energy stocks?
Major U.S. indexes closed positively last week and continued to extend their gains on Monday. The Dow Jones Industrial Average gained 200 points, the NASDAQ composite advanced 0.8 percent, and the S&P 500 increased 0.8%.
Key Factors
The increase in gains was driven by an optimistic start to the first-quarter earnings season and the de-escalating conflict in Syria. According to FactSet, the S&P 500 is expected to have risen 17.3% in 1Q2018, and this will mark the highest earnings growth since 1Q2011.
Source: FactSet Research Systems
Much of the earnings growth is being driven by the recently passed tax-reform bill. In addition, the U.S. Dollar Index has fallen 2.71% since the start of 2018. A weak dollar increases U.S. exports, which means U.S. stocks will be supported by a positive earnings outlook.
Green Spirit Industries (OTC: GSRX) announced a new joint venture with Sunset Connect, a cultivation and branded extractions business based in San Francisco. The two cannabis companies agreed to form a new entity, Green Spirit Essentials, which will operate a cannabinoid-extraction and -processing business in California.
Why It Matters: The right team, leading the right business, in the right market. GS Essentials will be managed by an all-star team, including its head extractor, Mark Young, who has received several industry awards. With recreational sales in California still in their infancy, experts at the helm, and demand growing exponentially, GS Essentials should hit the ground running.
Key Quote: “The public appetite in California for cannabis in forms other than flower continues to grow. We feel that offering consumers more varied ways to consume cannabis is a big part of the future of the industry.” – Les Ball, CEO
What’s Next: GS Essentials is just the latest addition to Green Spirit’s holdings. In recent weeks, it has announced the opening of its first dispensaries in Puerto Rico and California, and a JV with an established grow operation. Led by Les Ball, former Chairman and CEO of Macy’s Midwest, GSRX is well-positioned for long-term success.
Disclosure
(Green Spirit Industries [OTC: GSRX] is a client of RedChip Companies. RedChip Companies, Inc. received 1,000,000 registered shares of GSRX for consulting services and 50,000 shares for investor awareness services. Be advised: RedChip may sell some or all of its shares at any time, including when you are buying. )
Canopy Growth Corporation (TSX: WEED) and the Yukon Liquor Corporation ("YLC") announced a deal to supply Yukon with high-quality cannabis products to serve the upcoming adult retail market.
Why It Matters: This deal marks Canopy Growth's fifth agreement with a province or territory and speaks to the strong national position of the Company. Canopy Growth has also been selected to operate as a retail partner in Manitoba and will operate retail locations in Newfoundland and Labrador.
Key Quote: "Being the national supplier of choice requires presence and partnerships across the country, and supplying Yukon is an important part of that vision." - Mark Zekulin, President
What’s Next: Canopy Growth has established partnerships with leading sector names including cannabis icon Snoop Dogg, breeding legends DNA Genetics and Green House seeds, and Fortune 500 alcohol leader Constellation Brands, to name but a few. Canopy Growth operates eight cannabis production sites with more than 2.4 million sq. ft. of production capacity, including over 500,000 sq. ft. of GMP-certified production space. The Company has operations in seven countries across four continents and a proven track record of growth.
Esports Entertainment Group Inc. (OTCQB: GMBL), a licensed online gambling company with a focus on esports wagering and 18+ gaming, announced last week the signing of affiliate marketing agreements with 11 esports teams. The news comes as the Company ramps up affiliate marketing activities in support of its recent launch of VIE (https://vie.gg), the world’s safest, most secure, and most transparent esports wagering platform.
Why It Matters: GMBL fills an important void in the burgeoning esports market with its VIE wagering platform. Signing on some of the stop teams in the space shows good industry support and could lead to great momentum as the company grows its customer base.
Key Quote: “ We see this as both vindication that our platform is the one the industry has been waiting for, as well as a clear vote of confidence in our ability to execute and deliver a safe, regulated, and fully transparent esports wagering platform.” – Grant Johnson, CEO
What’s Next: Esports wagering is expected to explode to more than $23 billion by 2020. Gaining just a fraction of this business will bode extremely well for GMBL in the quarters and years ahead
Disclosure
(Esports Entertainment Group, Inc. [OTCQB: GMBL] is a client of RedChip Companies, Inc. GMBL agreed to pay RedChip Companies, Inc. a monthly cash fee for six [6] months of RedChip investor awareness services.)
eMARINE Global Inc. (OTC: EMRN), a leading provider of information and communications technology for the maritime industry, has been chosen to receive funding from a government grant program from the Korea Evaluation Institute of Industrial Technology (KEIT) to develop smart-ship technology for the “Fourth Industrial Revolution.”
Under the terms of the grant, eMARINE Global is leading a consortium, comprising the Research Institute of Medium and Small Shipbuilding (RIMS), Korea Marine Equipment Research Institute (KOMERI), APS Co. Ltd, and Global GTI Co. Ltd.
The three-year grant program awards the consortium 2.23 billion won (US$2.1 million) to develop an “Auto Pilot System with Collision Avoidance Function for Small and Medium Ships.”
The Company previously received similar government grant funding for three additional development programs, including its e-navigation application (Maritime Ministry), remote maintenance system (National IT Industry Promotional Agency), and internet-of-things data-platform software development (National IT Industry Promotional Agency).
Disclosure
(e-MARINE, Inc. [OTC: EMRN] is a client of RedChip Companies, Inc. EMRN agreed to pay RedChip Companies, Inc. a monthly cash fee and 600,000 shares of common stock for RedChip investor awareness services and consulting services.)
146 words
Quote of the Week
"Be wary of bad management teams, don't bet on dreams. Do your homework and be careful."
Dave Maley Manager Ariel Discovery Fund
Mark your calendars for the next RedChip Online Cannabis Conference.
Guest speaker - Irvin Rosenfeld
Subject: Cannabis Is for the Client
Irvin Rosenfeld is the longest-surviving federal medical-marijuana patient. He has appeared on numerous television shows and done hundreds of interviews. He is also a successful stockbroker, spokesman, and board member of Patients Out of Time, and he has published an autobiography about his long history of cannabis activism.
IDXG Fact Sheet: Interpace Diagnostics (NASDAQ: IDXG) is a fully integrated commercial organization that provides clinically useful molecular diagnostic tests and pathology services for evaluating the risk of cancer by leveraging the latest technology in personalized medicine for better patient diagnosis and management. - March 2018
TPIV Fact Sheet: TapImmune (NASDAQ: TPIV) develops immunotherapies targeting tumors and metastatic diseases for a variety of cancers. The Company's next-generation technology has been engineered to overcome the deficiencies of earlier cancer-vaccine approaches. - March 2018
IMRN Fact Sheet: Immuron Ltd (NASDAQ: IMRN) is an Australian biopharmaceutical company focused on immunotherapy using dairy-derived antibody products for humans. Immuron has a unique and versatile technology platform that can generate a wide range of products, all with a high safety profile. - March 2018
DGLY Fact Sheet: Digital Ally® (NASDAQ: DGLY), headquartered in Lenexa, Kan., specializes in the design and manufacture of the highest-quality video-recording equipment and video-analytic software. In industries such as law enforcement, emergency management, commercial fleets, and consumer use, Digital Ally pushes the boundaries of technology. - March 2018
CATS Fact Sheet: Catasys Inc. (NASDAQ: CATS) harnesses proprietary big-data predictive analytics, artificial intelligence, and telehealth. These elements, combined with human intervention and integrated, technology-enabled treatment solutions, deliver improved health to members and cost savings to health plans- March 2018
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