As our readership has increased, we have gained some attention from companies hoping to leverage our blog as a method to get the word out. We remain picky and seldom say yes to paid coverage. However, after extensive research and connecting with management from Predictmedix AI Inc. (PMEDF) (PMED.CN), we could not pass up this opportunity. In addition to being paid, we have bought shares on the open market, in greater dollar amounts than the compensation. So we are true investors. Once we explain why we are bullish on PMED, it should make sense to our readers why we couldn't pass up on this unique opportunity. If you like our picks you can follow this blog by clicking the follow button on the top of the left hand panel. We have 1035 followers on here as well as 124 followers on our Canadian blog. You can also follow us on X @StockTradePicks which has over 5,000 followers.
PMED is the maker of the SmartHealth AI System, a device similar to the full body scanners you would see at airports or metal detectors. During the height of the COVID-19 pandemic, the company garnered some sales. As one would expect, those sales have dried up as the world moved on from COVID and the stock price has declined as a result. However, just because COVID is no longer perceived as a threat, doesn't mean the market for this technology has abated. It just needed a rebrand and a new focus. That's what PMED has done with the next generation of the technology. It has integrated additional AI-driven features that enhance its effectiveness in health and safety assessments. It now evaluates 19 different parameters in a single scan, covering a broader spectrum of health indicators and enabling impairment detection and fatigue assessment.
PMED hasn't generated any revenue for 2024 and has limited working capital. However, accredited investors are clearly intrigued as it just raised $725,000 in two tranches to try to make this new business model work. This includes participation by German family offices, which shows the international appeal to high net worth individuals despite being a Canadian small cap listing on the CSE. We obviously had some concerns about the company given the recent financial performance and asked management some straightforward questions. We liked what we heard and we will summarize what we learned during that discussion. We think PMED's current valuation compares very favorably against similar type of junior companies listed in Canada. Unlike some of them, PMED actually had a history of selling its product and generating revenue. So it isn't a speculative startup at square one even though it is valued as one.
The three verticals that PMED will be focusing on are fit-for-duty workplace screening, health management in prisons, and health screening for defense personnel with a focus on the U.S. market. Fatigue and impairment are two of the leading causes of workplace accidents. Couple that with the fact that many manufacturing facilities are unionized. Management of these facilities needs some kind of method to document employee impairment to ensure the safety of the workplace as well as gather evidence in extreme cases that require termination. It's very straightforward to see the market potential here. Health screening for prisons and defense are intuitive when you realize that individuals in these types of settings live in close quarters. COVID-19 spread wreaked havoc on the prison system. Detecting sick prisoners or military personnel early and quarantining them before the virus spreads throughout the community is paramount. Focusing on these two industries is particularly smart during a Trump administration. Defense and prisons might be the only federally funded government programs that receive an increase in spending during his tenure.
PMED's revamped business model is indicative of a company that knows it must use its cash resources wisely. When looking at a SmartHealth AI unit, one can surmise that it's not that cheap to make or deliver to the customer. PMED has worked to get the per unit manufacturing cost down to $3,000. It operates on a leasing model, where the client commits to a minimum one-year contract at a price of $3,000 to $5,000 per month. So it takes just one month of revenue to recover the cost of the hardware. The lease allows for unlimited number of scans by the client while PMED also provides maintenance support. PMED's operating costs will be minimal. Based on the company's current burn rate of about $60,000 per month, we estimate that if it can lease out approximately 25 units, the $75,000 to $125,000 in monthly revenue should be enough to see it reach breakeven status.
For comparison, Healwell AI Inc. (AIDX.TO), a subscription-based AI tool for early detection and diagnosis in the healthcare industry, has had excellent growth but last quarter still lost over $11 million on $14 million revenue. AIDX trades at around a $285 million market cap. In addition to AIDX, NetraMark Holdings Inc. (AIAI.CN) is another company looking to leverage AI to improve health care and clinical trial outcomes. It uses AI to analyze past clinical trial data and patient populations to uncover efficacy, toxicity and placebo response. AIAI is a lot closer to PMED than AIDX when it comes to current revenue run rate. It generated about $460,000 in revenue last fiscal year with its Q1 2025 ending in December generating just under $400,000. Excellent growth, with that growth having been rewarded with a market cap of approximately $90 million.
One thing that we think is being overlooked is that in the process of PMED's operations, it has collected data from over 250,000 scans. PMED does not own client-specific data, but it retains the ability to analyze anonymized and aggregated datasets to identify broader health and behavioral trends. One of the most promising applications of this data is the ability to detect health conditions through multispectral imaging. PMED's AI models have demonstrated the potential to identify elevated blood glucose levels simply by scanning a person’s face. With further refinement, its data could facilitate the early detection of conditions such as dementia, Alzheimer's, and other neurological or metabolic disorders. This opens the door to new revenue streams, including partnerships with healthcare providers, insurance companies, and research institutions seeking to leverage predictive analytics for proactive health management. Light AI Inc. (ALGO.NE) may be the most similar comparable to this portion of PMED's business opportunity, as it applies AI to Smartphone images to identify disease. ALGO is currently valued at around $67 million as a pre-revenue company.
With 192 million shares post-raise, PMED trades at a valuation of CAD $8 million at $0.04, well below these type of peer companies. While AIDX is certainly well ahead of PMED when it comes to revenue generation, AIAI isn't. We also think the nature of PMED's business model allows it to attain profitable operations from a much lower revenue base. PMED has a one month payback period on sales and we have high confidence that the company will be able to secure multiple contracts. In addition to that, we think the data generated from the 250,000 scans is inherently valuable and unique, therefore justifying a valuation similar to that of ALGO for this portion alone.
In addition to the 192 million shares, there are 42 million warrants with a strike price at $0.05. We think that the stock price will be at a level where those warrants will be exercised, so any price target should consider 234 million fully diluted shares. The exercise of the warrants would bring in $2.1 million in cash, reducing the need for future equity raises. Based on 234 million shares outstanding, we think that a $0.25 target on PMED is fair. This would lead to a $59 million valuation, below that of ALGO which has not yet generated revenue, and less than two-thirds of AIAI. We are prepared to significantly increase that target valuation to $100 million or more should PMED deliver on revenue generating contracts and prove that the business model has a much shorter path to profitability than these more bullishly valued peers.
Disclosure: We are long PMED.CN