On the surface it's the kind of thing the market doesn't want to see. In reality though, CollabRx Inc. (NASDAQ:CLRX) will be far better off - and far batter positioned to reward shareholders - by doing what needs to be done in order to continue capitalizing on the opportunity it has in front of it. And what exactly did CLRX do? It raised some money by shares it had sitting on the shelf.
All told, on Thursday, CollabRx put about $1.8 million in its pocket by issuing 913,500 shares at $2.00 apiece. That was a little less than Wednesday's closing price of $2.34, though as far as fund-raising goes within the small cap world, it wasn't anything unusual. Sometimes a company has to give newcomers a little incentive just to avoid dragging the process out for days while selling the new shares at the market price (doing so can cause far more damage to a stock's value than simply getting it all done in one shot the way CLRX did).
As of, well, around June 25th when the secondary offering officially closes, CollabRx will have roughly 2.9 million outstanding shares, and assuming the price holds steady around $2.00 per share, the market cap will be $5.8 million. CLRX will have, assuming a steady cash-burn rate, will have about $2.2 million in cash in the bank. That should be enough to hold the company over until subscription revenue to its cancer-fighting tool has enough size and scale to carry the company forward.
This is where a deeper look at CollabRx's future is merited, and fun.
Last quarter, the company generated $81K in product revenue. It's not a lot, but CLRX was never really planning on a windfall in Q1. The bulk of its current customer list was either added in the latter part of Q1 or was added in Q2, and Q2's new client revenue hasn't been tallied at all yet because we're still in the midst of that quarter. Even then, however, Q2's top line is going to be muted, as the wide swath of the folks who downloaded the app for the iOS [nearly 10,000 in all] didn't do so until late May or early June (largely after the ASCO presentation), so we won't see that revenue kick in - in earnest - until Q3, which begins in about a week and a half, and won't be reported until October or early November.
The point is, the next six months or are the proverbial "coming out" party for CLRX; the company you see today isn't likely to be the one you'll see in November. The one you're going to see in November is probably going to the CollabRx that Taglich Brothers saw coming several weeks ago.... the one that would be on pace to generate $2.6 million in annual revenue by 2016, but be doing $16.5 million in annual sales by 2020. Considering the number of doctors that just downloaded the app a month ago - the aforementioned 10,000 or so - it's not difficult to believe the company is capable of those kinds of numbers in the near future. The cash raised this week is just the pocket money the company needs to get from here to there, where it can sustain itself.
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For more on CollabRx, visit its corporate website here. Or, you can read the SCN research report here, or the SCN recommendation here.
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