In our recent write ups we have been long on cannabis and cannabis-related stocks, which have worked out pretty well for us and our readers. While we will continue to look for trading opportunities in this sector, we are switching gears for this pick into the cryptocurrency and blockchain industry. Netcoins Holdings Inc. (GARLF) (NETC.CN) announced that it achieved cash flow positive results for August. It traded over 7 million shares in Canada but ended up just 5% yesterday. We think that once the price of Bitcoin recovers in the fall and interest in blockchain stocks returns, this one will be an absolute monster. Netcoins has demonstrated that it has a quickly growing business that is already at the turning point of profitability. We are up to 660 followers despite not giving out a lot of alerts, a fact that we think is indicative of a diligent and prudent stock picking history. If you like our picks you can follow our blog by clicking the follow button on the top of the left hand panel. You can also follow us on Twitter @StockTradePicks. We have over 3,000 followers on Twitter as well.
Netcoins has a very simple business plan. It has set up three networks or methods for regular people to buy or sell Bitcoin, Ethereum and other leading cryptocurrencies (with that list growing with time) and makes a mark-up on the sale, as well as brokerage services for businesses and high net worth individuals interested in cryptocurrency. (See website)
The website is growing in popularity with Alexa results trending strongly in the right direction. It sits just outside the top 100,000 most active sites in Canada. However, these traffic results are based on the average of the last three months. Stuffgate, which discloses the last month of Alexa traffic rankings has Gonetcoins.com ranked #136,639 in the world. That means traffic to the website is greatly accelerating. Keep this in mind as this point will come up later when analyzing daily revenue trends. We suggest that investors look to these websites every so often to get an idea of the increasing trend of web traffic which will be correlated to revenue growth.
Gonetcoins.com has generally received positive reviews in an industry where the first gut reaction from people with bigger mouths than brains online is to yell "scam" at everything:
None of this should be too surprising, given the corporate update that NETC provided yesterday:
1. Transactional revenue of $12.9 million so far for Q3, averaging $6.5 million each month, and likely weighted more towards August.
2. Generating positive cash flow of $64,000 in August.
3. Ending the month of August with over $5.5 million in cash.
Let's review the financial statements for Q2:
What can we learn from these results and comparing them to the end of June?
First, cash and equivalents have decreased $200,000 from $5.7 million to $5.5 million in two months. This claim of being cash flow positive for August would mean July would have been negative to offset that. However, this cash balance says nothing to the effect of the other working capital items. Did Netcoins use some of that cash to pay down trade payables? Is more money owed to the company through receivables? Did the cryptocurrency inventory increase (which would make sense in a rising revenue environment) through more purchases? Or did these account balances flow in the opposite direction to profitability?
The main point to gather from the cash balance - whether or not Netcoins pulled a slight profit in August or not - is that this company is at such a low and slowing burn rate that we can expect that cash balance to last without the need to finance for the foreseeable future. Cash went from $6.9 million to $5.7 million from Q1 to Q2, a $1.2 million drop. Over two months in Q3, it only dropped $200,000. A vast improvement. NETC's market cap in Canada is $12 million at $0.10 compared to the $5.5 million in cash with no debt. This quickly growing cryptocurrency business where investors can expect a reasonable chance of profitability soon is valued at an enterprise value of only $6.5 million.
Now to the income statement side. What we like about Netcoins' business is that it is very simple to understand from an operating perspective and analyze from a financial perspective. The company has set up a network to resell cryptocurrency and make a small mark-up on each transaction. For the first six months of the year, the company made $277,000 in gross profit on $10,218,000 in revenue, a 2.7% margin. That margin can be impacted by promotional rates throughout the year, but for simplicity's sake let's assume that the company achieved the same margin of 2.7% for July and August. Revenue for those two months was greater than the first six months combined, so it stands to reason that gross margin would be greater too. A 2.7% margin on $12.9 million in revenue leads to a $350,000 gross margin.
The net loss of $19.6 million for the first six months of the year looks ugly, but most of that is due to the substantial expense of the listing fees that were part of the reverse takeover of Gar Limited and the value of the stock options granted to management through the Black-Scholes valuation model. these options don't have any actual value unless the stock price surpasses $0.25 (lowest strike price) and $0.35 (the bulk of the options) within the next five years.
When you subtract out the $17.8 million comprising of these two line items, the operating expenses for the year are just over $2 million, or $340,000 per month. We estimated gross margin over the two months of Q3 to be $350,000 or $175,000 per month. That leaves a gap of $165,000 for average cash burn per month. Marketing was $600,000 for the first six months of the year, and is completely discretionary. If the marketing spend was a little less for Q3, and the revenue growth weighted more towards August, it is very conceivable that August was a profitable month in addition to being cash flow positive. Q3 has been boosted by significant transactions occurring on certain days, for instance. the company recorded $2 million in transactional revenue in one day in July. With the increasing web traffic to the site, and the ability to successfully complete 7-digit transactions, expect more users putting bigger orders through Netcoins.
Netcoins may be a profitable company as we speak. And if it's not, it will be soon at this pace. Once blockchain stocks get hot again, we expect NETC to be at the top of people's lists as one that has been successful in attaining profitable growth. The 52-week high was $0.65 on hype. The stock price is $0.10 now. You can see the return possibilities when Netcoins has industry hype AND the financial performance to back it up.
While the increasing price of Bitcoin and other cryptocurrencies would certainly help with sentiment on the stock, keep this in mind that should be made apparent from the business plan, the operating performance and the company's own statements - Netcoins is NOT impacted by falling cryptocurrency prices. A panic sell is just as good as a FOMO increase since it is volatility and volume that drives profitability to Netcoin's mark-up model. It does not have the same operating issues as the cryptocurrency miners when prices are low. NETC is the best cryptocurrency stock to own in our opinion because it will make money when cryptocurrencies go up or down. It will participate in the rise in sentiment during bull markets for cryptocurrency but will not go bankrupt during bear markets for cryptocurrency.
Disclosure: We are long NETC.CN
Bitcoin has gone from a concept worth pennies a few years ago to worth thousands of dollars. It may appear to some who are late to the game that the opportunity to get rich is gone. However, there are still plenty of ways to make some money trading in bitcoin and other cryptocurrency. Here are some links to valuable reports and strategies:
The Cryptocurrency Codex from the Cryptocurrency Institute
Secrets To Unlimited Free Bitcoin
The Crypto-Currency Evolution eBook
Bitcoin Complete Guide for Dummies
The Bitcoin Miracle Guide
The Bitcoin Cheat Code Book
The Crpytocurrency Course
Bitcoin Investing Live
If you're interested in making money investing or trading the stock market, here are some good resources to assist you. This includes technical analysis, investing in the weed sector, dividend stock investing, gold and commodities, sector rotation, options trading and microcap trading strategies.
Microcap Millionaires Free Video: Cheap Gold Miner Set to Soar in Fall 2017
The dividend stock report from dividendstocksonline.com
Netcoins has a very simple business plan. It has set up three networks or methods for regular people to buy or sell Bitcoin, Ethereum and other leading cryptocurrencies (with that list growing with time) and makes a mark-up on the sale, as well as brokerage services for businesses and high net worth individuals interested in cryptocurrency. (See website)
The website is growing in popularity with Alexa results trending strongly in the right direction. It sits just outside the top 100,000 most active sites in Canada. However, these traffic results are based on the average of the last three months. Stuffgate, which discloses the last month of Alexa traffic rankings has Gonetcoins.com ranked #136,639 in the world. That means traffic to the website is greatly accelerating. Keep this in mind as this point will come up later when analyzing daily revenue trends. We suggest that investors look to these websites every so often to get an idea of the increasing trend of web traffic which will be correlated to revenue growth.
Gonetcoins.com has generally received positive reviews in an industry where the first gut reaction from people with bigger mouths than brains online is to yell "scam" at everything:
None of this should be too surprising, given the corporate update that NETC provided yesterday:
"VANCOUVER, British Columbia, Sept. 06, 2018 (GLOBE NEWSWIRE) -- Netcoins Holdings Inc. (“NETC” or the "Company") (CSE: NETC) (OTC: GARLF) is pleased to provide further transactions updates, plus information on its Retail, OTC and upcoming Dealer-Brokerage lines of businesses.
Revenues
In the first two months of Q3 of fiscal 2018 (July and August, 2018), Netcoins has generated $12.9 million in transactional revenues through its Retail and OTC lines of businesses. This represents a very substantial increase in revenue per day over Q1 and Q2, and was generated during months where Bitcoin experienced new 2018 lows below USD $6,000 per coin. Netcoins transactional revenues are not tied to the price of underlying cryptocurrencies, including Bitcoin.
Cash
At the end of August, Netcoins has over CAD $5.5M million in cash, and cash equivalents, with zero debt. Netcoins generated positive cash flow in August of $64,000, being the first cash flow positive month since going public in March 2018.
Coin Listings
Netcoins has now completed listing all of the top 7 coins by market cap, which is a substantial accomplishment, and makes our platform the only one in Canada to do so, to our knowledge. This also makes our platform more attractive to buyers/sellers/investors and also to altcoins as a place to be listed.
Netcoins has listed (or has agreed to list) 7 new tokens in Q3. This has generated listing fees of approximately CAD $207,000 in Q3 thus far.
Retail Network
Our retail network continues to grow, with more than 21,000+ locations for acquiring crypto in Canada, Australia, and Europe. We have also added the ability for citizens of Kenya and Ghana to buy crypto from Netcoins with USD Flexepin vouchers. In the coming months, we expect to be adding Tanzania, Zambia, Uganda, Rwanda, South Africa, Nigeria, Zimbabwe, Malawi, Namibia and Botswana in the same fashion.
Further, we are seeking distribution partnerships to significantly expand the retail network in the coming months.
OTC Services
Netcoins OTC (Over-The-Counter) business, also known as our private brokerage, continues to gain strength in the global market. In Q3 so far, we have onboarded four cryptocurrency miners providing them with liquidity in addition to serving crypto hedge fund operators, crypto brokers and high net worth individuals. Our OTC business provides three distinct market advantages:
- Market Leading Service Fees
- Speed of Payment (often same day)
- Personalized Account Rep and an Always-on OTC platform for transactions at otc.gonetcoins.com
Dealer-Brokerage Services
Netcoins continues discussion with multiple leading Dealer-Brokerages in Canada to enable Canadian investors to buy and sell crypto from their cash trading accounts using their traditional brokers. Netcoins is also providing a business plan, including custodial options, to IIROC for regulatory evaluation in September/October.
“Netcoins is making significant progress on our mission to bring crypto to the masses. We are focused on becoming the leading crypto brokerage services firm in the country, with multiple lines of revenue generating business,” said Netcoins CEO, Mark Binns. “Our revenue curve from Q2 to Q3 shows that we are finding true product-market fit, and our customers are relying on us and referring us actively. We look forward to providing more updates on progress as it occurs.”
About the Company
The Company is in the business of developing software to make the purchase and sale of cryptocurrency easily accessible to the mass consumer and investor through brokerage services."
What stands out to us in this press release is:The Company is in the business of developing software to make the purchase and sale of cryptocurrency easily accessible to the mass consumer and investor through brokerage services."
1. Transactional revenue of $12.9 million so far for Q3, averaging $6.5 million each month, and likely weighted more towards August.
2. Generating positive cash flow of $64,000 in August.
3. Ending the month of August with over $5.5 million in cash.
Let's review the financial statements for Q2:
First, cash and equivalents have decreased $200,000 from $5.7 million to $5.5 million in two months. This claim of being cash flow positive for August would mean July would have been negative to offset that. However, this cash balance says nothing to the effect of the other working capital items. Did Netcoins use some of that cash to pay down trade payables? Is more money owed to the company through receivables? Did the cryptocurrency inventory increase (which would make sense in a rising revenue environment) through more purchases? Or did these account balances flow in the opposite direction to profitability?
The main point to gather from the cash balance - whether or not Netcoins pulled a slight profit in August or not - is that this company is at such a low and slowing burn rate that we can expect that cash balance to last without the need to finance for the foreseeable future. Cash went from $6.9 million to $5.7 million from Q1 to Q2, a $1.2 million drop. Over two months in Q3, it only dropped $200,000. A vast improvement. NETC's market cap in Canada is $12 million at $0.10 compared to the $5.5 million in cash with no debt. This quickly growing cryptocurrency business where investors can expect a reasonable chance of profitability soon is valued at an enterprise value of only $6.5 million.
Now to the income statement side. What we like about Netcoins' business is that it is very simple to understand from an operating perspective and analyze from a financial perspective. The company has set up a network to resell cryptocurrency and make a small mark-up on each transaction. For the first six months of the year, the company made $277,000 in gross profit on $10,218,000 in revenue, a 2.7% margin. That margin can be impacted by promotional rates throughout the year, but for simplicity's sake let's assume that the company achieved the same margin of 2.7% for July and August. Revenue for those two months was greater than the first six months combined, so it stands to reason that gross margin would be greater too. A 2.7% margin on $12.9 million in revenue leads to a $350,000 gross margin.
The net loss of $19.6 million for the first six months of the year looks ugly, but most of that is due to the substantial expense of the listing fees that were part of the reverse takeover of Gar Limited and the value of the stock options granted to management through the Black-Scholes valuation model. these options don't have any actual value unless the stock price surpasses $0.25 (lowest strike price) and $0.35 (the bulk of the options) within the next five years.
When you subtract out the $17.8 million comprising of these two line items, the operating expenses for the year are just over $2 million, or $340,000 per month. We estimated gross margin over the two months of Q3 to be $350,000 or $175,000 per month. That leaves a gap of $165,000 for average cash burn per month. Marketing was $600,000 for the first six months of the year, and is completely discretionary. If the marketing spend was a little less for Q3, and the revenue growth weighted more towards August, it is very conceivable that August was a profitable month in addition to being cash flow positive. Q3 has been boosted by significant transactions occurring on certain days, for instance. the company recorded $2 million in transactional revenue in one day in July. With the increasing web traffic to the site, and the ability to successfully complete 7-digit transactions, expect more users putting bigger orders through Netcoins.
Netcoins may be a profitable company as we speak. And if it's not, it will be soon at this pace. Once blockchain stocks get hot again, we expect NETC to be at the top of people's lists as one that has been successful in attaining profitable growth. The 52-week high was $0.65 on hype. The stock price is $0.10 now. You can see the return possibilities when Netcoins has industry hype AND the financial performance to back it up.
While the increasing price of Bitcoin and other cryptocurrencies would certainly help with sentiment on the stock, keep this in mind that should be made apparent from the business plan, the operating performance and the company's own statements - Netcoins is NOT impacted by falling cryptocurrency prices. A panic sell is just as good as a FOMO increase since it is volatility and volume that drives profitability to Netcoin's mark-up model. It does not have the same operating issues as the cryptocurrency miners when prices are low. NETC is the best cryptocurrency stock to own in our opinion because it will make money when cryptocurrencies go up or down. It will participate in the rise in sentiment during bull markets for cryptocurrency but will not go bankrupt during bear markets for cryptocurrency.
Disclosure: We are long NETC.CN
Bitcoin has gone from a concept worth pennies a few years ago to worth thousands of dollars. It may appear to some who are late to the game that the opportunity to get rich is gone. However, there are still plenty of ways to make some money trading in bitcoin and other cryptocurrency. Here are some links to valuable reports and strategies:
The Cryptocurrency Codex from the Cryptocurrency Institute
Secrets To Unlimited Free Bitcoin
The Crypto-Currency Evolution eBook
Bitcoin Complete Guide for Dummies
The Bitcoin Miracle Guide
The Bitcoin Cheat Code Book
The Crpytocurrency Course
Bitcoin Investing Live
If you're interested in making money investing or trading the stock market, here are some good resources to assist you. This includes technical analysis, investing in the weed sector, dividend stock investing, gold and commodities, sector rotation, options trading and microcap trading strategies.
Microcap Millionaires Free Video: Cheap Gold Miner Set to Soar in Fall 2017
The dividend stock report from dividendstocksonline.com
The dividend stock report from Dividend Stocks Rock
Top rated signals for binary options from binaryoptionsprosignals.com
Goldmasterinvesting.com Ocean Of Gold Report for the top 15 gold mining companies
Trader Review shows how to time the market with its "Percent of X" indicator
The Trader's Academy Club
The Wealth Builder's Club from beatthemarketanalyzer.com
MyBB: A Forum For Investors and Traders
Spartan Trader Forex Academy Live Daily Trading Room
Try the Z Code System if you're looking for other ways to make money systematically outside of the stock market.
Top rated signals for binary options from binaryoptionsprosignals.com
Goldmasterinvesting.com Ocean Of Gold Report for the top 15 gold mining companies
Trader Review shows how to time the market with its "Percent of X" indicator
The Trader's Academy Club
The Wealth Builder's Club from beatthemarketanalyzer.com
MyBB: A Forum For Investors and Traders
Spartan Trader Forex Academy Live Daily Trading Room
Try the Z Code System if you're looking for other ways to make money systematically outside of the stock market.
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