As you are aware we will be producing a newsletter shortly. Right now we are caught up in the throes of design; branding; and, all of the good things associated with what we believe will be one of the best newsletters out there.

We decided to post our first report a bit ahead.

Please give us your objective opinions.

 

What follows is our first company report.

 

Not Investment Advice – Issue #1

 

Analysis from Big Al

 

We have done everything to make this report as unbiased and factual as possible. In light of this we must state; however, that our information is from sources that we deem to be reliable but we cannot guarantee its accuracy. This report is not meant to be a recommendation to purchase or sell shares in Theralase Technologies, Inc. (Theralase or the Company). We also direct you to the disclaimer at the end of this report.

 

Dr. Richard Postma, Cory Fleck and Al Korelin all have also purchased shares in Theralase from the open market as previously disclosed.

 

Having said that, what follows is a company profile that is planned on being used as part of a submission of a Form 20-F Registration Statement to the U.S. Securities and Exchange Commission. The shares of Theralase currently trade in the United States under the symbol “TLTFF” and in Canada under the symbol “TLT”.

 

Note that the Company has been in existence since 1995 and has historically generated revenue from its laser products.

 

Our primary interest in the Company stems from its cancer technology the description of which comprises the majority of the Company Profile.

 

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Company Profile

Theralase Technologies Inc., founded in 1995, designs, develops, manufactures and markets patented, superpulsed laser technology utilized in biostimulation, a procedure utilizing a laser to deliver healing heat to a patient’s skin. This procedure is non-invasive, painless and there are no post-treatment restrictions. The Company also utilizes light-sensitive Photo Dynamic Compounds activated by the laser to specifically target and destroy cancers, bacteria, viruses as well as microbial pathogens applications. The technology is safe and effective in the treatment of chronic pain, neural muscular-skeletal conditions and wound care. Theralase lasers are FDA, Health Canada and CSA/UL approved, and have international ISO 13485 certification.

Theralase’s strategy includes two parts:

1. Production, marketing and distribution of the TLC-1000 and patented TLC-2000 Theralase Superpulsed Laser Technologies to healthcare practitioners internationally, focusing on the treatment of chronic pain, sports injuries and wounds, including reduction of inflammation and acceleration of tissue healing of neuromuscular skeletal conditions.

 

2. Commercialization of the patented TLC-3000 Photo Dynamic Compound (“PDC”) Cancer Technology through pre-clinical research, clinical trials and technology development to destroy cancers for oncological applications and to destroy bacteria in human, animal and sterilization applications.

 

Advancing the Theralase Technology Platform

The following summarizes several scientific, clinical and business developments that management believes will fuel and accelerate near, mid and long term Company growth:

 

TLC-2000: Biofeedback Laser Technology

Theralase continues to make progress on commercializing its next generation therapeutic laser – the patented TLC-2000. The TLC-2000 Biofeedback Therapeutic Laser Technology targets tissue at depth with exact precision thus enabling exact doses of energy to be delivered to injured tissue for enhanced efficacy and accelerated healing. The TLC-2000 is also a learning device that remembers the most optimized protocols based on an individual patient’s optical tissue profiles.

 

Theralase has completed the pre-commercial prototype of the TLC-2000 Biofeedback Therapeutic Laser System, which management believes will lead to the commercial version launching in Canada. Theralase is also launching 5 beta prototypes for beta testing by Key Opinion Leaders (KOLs) shortly and then supply pre-commercial prototypes to its Canadian Territory Sales Managers (TSMs) for solicitation of orders and trade-ups of the existing TLC-1000 technology from its existing customer base. The TLC-2000 will commercially launch the patented TLC-2000 Biofeedback Therapeutic Laser Technology in Canada in mid 4Q2014. Theralase intends to utilize a recurring revenue sales model; whereby, it will partner with practitioners and participate in the revenue stream generated through the use of the therapeutic laser technology for patient treatments.

 

TLC-3000: Cancer Therapy

The proprietary TLC-3000 medical laser system has been custom designed by Theralase for the activation of Theralase’s patented Photo Dynamic Compounds (PDCs) which management believes will result in the successful destruction of cancer cell lines in-vitro.

 

In 2012, Theralase announced that it had successfully identified leading drug candidates, one of which will be used for safety and efficacy clinical testing in human cancer patients. In multiple preclinical studies, the leading drug candidates have been selected from Theralase’s library of PDCs and in testing have repeatedly demonstrated:

• extremely high efficacy, virtually 100% kill rate, in various cancer cell lines including brain, prostate, bladder, breast and colorectal cancers
• robust destruction of sub cutaneous (under the skin) cancerous tumors in animals
• extremely low toxicity
• high stability, allowing for a long shelf life

 

In 2012, Theralase announced that its anti-cancer PDC technology was found to completely destroy subcutaneous (under the skin) colon cancer tumours in a mouse model. On follow-up, the cancer free status was maintained in two-thirds of the animals for twenty months without recurrence of cancer (equivalent to 50 human years).

 

The Company commenced Milestone 2 – in-vivo Small Animal Pre Clinical Study in 2013; specifically, the evaluation of the safety and efficacy in the destruction of numerous cancer cell lines utilizing in-vivo small animal models.

Theralase’s leading patented oncology PDC has repeatedly demonstrated that it is:

• 100% cancer cell kill at very low concentrations (< 0.8μM) leading to high efficacy
• 0% toxicity at high concentrations (> 100μM) with no side effects leading to very high safety profile
• More effective at killing cancer cells than FDA approved drugs (668,000 x ALA, 198 x PHOTOFRIN®)
• Excellent specificity and selectivity with a quick evacuation from healthy cells and a high light fluence required for activation
• Ultra low toxicity as the PDC never enters blood stream in the destruction of bladder cancer
• Water soluble, small molecule that readily penetrates cellular membrane and localizes to the DNA
• Able to treat solid core hypoxic tumors, using a Type 1 and Type 2 activation, such as: breast, prostate, lung and bladder
• Activated at a variety of wavelengths allowing shallow and deep tumor destruction

 

Theralase is currently completing preclinical research to validate its PDC technology in an animal cancer model to support an Investigational New Drug (IND) application to be submitted to the FDA in 1Q2015. This IND application will allow Theralase to commence a Phase 1/2a human clinical trial to prove the safety and efficacy of its PDC technology on a 30 subject population with commencement in early 2015 and scheduled completion in late 2015 / early 2016.

 

Theralase has a growing portfolio of intellectual property patents to comprehensively protect the Theralase PDC technology for many decades allowing the company to enjoy the benefits of intellectual patent protection for many years.

 

Issued USA Patents: 6,962,910, 7,612,057, 8,148,360, 8,445,475

Pending USA Patent Applications: 61/801,674, 13/863,089, PCT/US13/36595

 

Theralase’s anti-cancer technology pipeline includes numerous highly effective drug candidates, in various advanced stages of preclinical development. Theralase will continue to validate its extensive data with additional cancer animal models and toxicology analyses to bring these PDC drug candidates online for various cancer and bacterial applications.

 

TLC-3000: Cancer Vaccine Research

In 2Q2014 preclinical animal testing, performed at Princess Margaret Cancer Centre, University Health Network (“UHN”), demonstrated that Theralase’s lead PDC, intended for the destruction of cancer, demonstrated an ability to render animals immune to repeated exposures of the same cancer. This initial data was accepted for presentation at the 37th Annual American Society for Photobiology that took place in San Diego, California in June 2014.

 

In previous research conducted at UHN by Theralase, mice were injected with 350,000 colon cancer cells (murine cell line CT26.CL25) to produce tumors that were allowed to grow to approximately five millimeters in size. They were treated with an intra-tumoural injection of Theralase’s lead PDC (3 mg/kg TLDOsH2IP) and then illuminated by Near Infrared (NIR) light (808 nm, 600 J cm-2) to activate the PDC. The vast majority of tumours were completely destroyed, with the PDC treatment demonstrating prolonged tumor regression.

 

In this latest research, the same mice who received the initial, successful Photo Dynamic Therapy (PDT) were re-injected with the same number of colon cancer cells, 13 to 23 days later. With no further treatment intervention, mice in these experiments, demonstrated either a small tumor regrowth, which quickly regressed (40%), or in the majority of animals, no tumor regrowth at all (60%), suggesting a short-term immune-mediated (immune “memory response”) tumor rejection.

 

To further prove the resilience of the PDT treatment, these same animals were then injected a third time with an additional 350,000 colon cancer cells at ten months post PDT treatment. None of these animals showed any sign of tumor regrowth (100%), even at 3 months post follow up, suggesting the presence of a long-term anti-tumor immunity, responsible for complete tumor rejection.

 

To strengthen the data, control experiments were conducted where age matched mice without prior tumor exposure or PDT treatment were injected with the same number of colon cancer cells; whereby, the majority of these mice proceeded to develop tumors and did not survive more than one month following the injection.

 

These initial results are being further researched by Theralase and UHN scientists to confirm the immune-mediated (immune “memory response”) tumor rejection in additional subject animals. This potential short and long term anti-cancer memory response suggests a major breakthrough in cancer research and may provide substantial treatment benefit and survival advantage to cancer patients. Technology that is able to rapidly and effectively destroy “patient-specific” cancer cells, prevent their recurrence and provide long lasting protection against local and distant metastasis, offers immense clinical benefit to cancer patients and the facilities that treat their disease.

 

This is one of the first preclinical trials to show that it’s possible to generate a long-term anticancer memory response. For the first time in Theralase’s research program, Theralase has demonstrated that Near Infrared (“NIR”) Photo Dynamic Therapy (“PDT”) leads not only to long standing clearance of colon cancer cells, but also provides long lasting protection against further tumor cell challenge in young (eight to ten weeks old) and older (ten to eleven month old) mice. It is the Company’s first step toward the long-term goal of developing an affordable and practical vaccine to prevent cancer recurrence. The Company plans to further validate this research with additional animals and then find the best way of translating this research into a human clinical trial. To complete the preclinical and clinical development in this ground breaking work, Theralase has elected to collaborate with experts in: medical biophysics, immunology and clinical oncology at UHN and with other internationally acclaimed clinical research institutes to further advance this remarkable platform technology.

Validated Success in Destruction of Bacteria

In 2012, Theralase presented new scientific data supporting the application of Theralase’s advanced sterilization platform technology enabling 8 log kill (99.999999%) of life threatening infectious microorganisms, such as Staphylococcus Aureus (S. aureus), Escherichia Coli (E. coli) and Listeria Monocytogenes (Listeria) bacteria. Theralase’s PDCs were effective in oxygenated (normoxic) and in non-oxygenated (hypoxic) conditions. These results demonstrated that the unique Photo Dynamic Therapy (“PDT”) effect of Theralase’s patented compounds does not depend on oxygen availability and they are therefore able to act both as Type 1 (oxygen independent) and as Type 2 (oxygen dependent) photosensitizers.

 

The photodynamic antibacterial effects of this new class of photosensitizers were evaluated against a strain of S. aureus (ATCC 25923) and a methicillin-resistant strain of S. aureus (MRSA, ATCC 33592). Bacterial samples were dosed with a range of photosensitizer concentrations (0.3-12 μM) and exposed to 530 nm light (90 J/cm2) in normoxic conditions (ambient atmosphere) and in hypoxic conditions (0.5% O2). The Theralase PDCs exerted Photo Dynamic Inactivation (“PDI”) of the Staphylococcus aureus and Methicillin-resistant Staphylococcus aureus in normoxia with an 8 log kill (99.999999%) providing a complete sterilization effect in microgram concentrations. The Theralase PDCs maintained this PDI potency under hypoxic conditions (low oxygen), with one of the PDCs becoming even more active in low-oxygen environments.

 

The observation of activity in hypoxia suggests that there exists an oxygen-independent, Type 1 photo process for this new class of compounds in addition to the typical Type 2 pathway mediated by singlet oxygen.

 

Future applications of the PDC technology in bacteria destruction may involve: animal applications, human applications, food safety through food processing equipment sterilization, hospital treatment room sterilization, medical equipment sterilization, bacterial load elimination in wounds and other bacteria destruction applications.

 

From a commercial viewpoint, the higher the “kill rate” in normoxic and hypoxic conditions combined with the shortest time to accomplish this task, the more favorably physicians, scientists and hospital administrators will view the disinfection approach.

 

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Analysis from Cory:

 

In today’s venture markets it can be very hard for even the best companies to raise money. That is why you will hear analysts and fellow investors saying “Cash is king”. I do agree with the fact that a cashed up company is better than a company with no positive cash flow; however, there is one better situation… A company with positive cash flow. If a company can generate cash flow this lessens the need to further dilute through equity offerings.

The company we are focusing on in this issue of Not Investment Advice has cash flow and is on the verge of generating a greater amount of cash flow from operations. As stated in the introduction to the company Theralase has two segments to its business, the therapeutic division and the cancer research division. Financially, the therapeutic division is generating cash flow – which I believe provides a base in the stock price – and the cancer division -which is the blue sky potential.

The beauty of the Theralase story is simplicity. Cash generated from the therapeutic division can be used to advance the cancer research and limit the need to dilute though private placements. Please understand that Theralase most likely will have to dilute through a share offering but that should come at a higher price.

Financial analysis

When running the numbers for Theralase we need to lock in some assumptions. These numbers/assumptions were obtained through conversations with CEO and President Roger White as well as the June 30^th, 2014 Q2 financials available on SEDAR (or by clicking here).

–          Current burn rate is between 100k and 125k / month – this includes both divisions

o   This amount could rise to 150k/month as the cancer research ramps up in preparation for the clinical trials

–          The new TLC-2000 will sell for $15,000 with a profit margin of 75%

–          Cash as at June 30^th, 2014 was 2,808,047. We can assume the cash position in early October 2014 is $2.2 Million.

After chatting to Roger White regarding the expected sales of the TLC 2000 he states that they hope to sell around 100 units in the first three months after hitting the market (which is roughly 33 units per month). For conservative sake we will use a lower figure of 15 units to run our numbers. We will also use a profit margin of 70% instead of 75%. Over my time investing, conservative estimates have never lead me astray.

If Theralase can sell 15 units a month at a 70% margin the company would generate $157,500/month.  This number would cover the 150k/month of operating expenses and the continued cancer division research.

As I stated above, the therapeutic division provides a base to the stock price. We should not expect booming sales of the TLC-2000 which would catch investor’s eyes but rather a steady stream of cash entering the company to offset the costs of starting the cancer trails. I continue to believe Theralase is financially strong moving into 2015.

Share structure and share price

With 78.2 million shares outstanding as at June 30^th, 2014 and 9.6 million warrants exercisable at $0.20 Theralase has a reasonably solid share structure. If the 9.6 million warrants were all exercised, almost $2 million would enter the company till while keeping the total shares outstanding under 100 million.

There are 1.48 million warrants outstanding priced at $0.38 as well as 300,000 options at $0.35 and 1.81 million options at $0.50 outstanding. These numbers are insignificant currently because Theralase shares are trading at $0.275 (on October 2).

Overall I like the share position of Theralase considering the company has a revenue stream as well as blue sky potential.

Other financial aspects

Here are some other aspects that I considered when reviewing the financial condition of Theralase.

–          Liabilities are in good shape. No major short term or long term outstanding debts. This is a sign to me of a well-run company that is on top of its finances.

–          Trade and Other Receivables is higher this year. I would like to see more of the outstanding accounts received. As there were no write-downs in the trade receivables I will be watching this number closely next quarter. The aspect that calms me is that most of the customers of Theralase are private clinics with impeccable reputations.  I was not able to find many reports stating that these types of clinics are struggling.

–          Administrative Expenses especially in the General and administrative expenses aspect has increased significantly this year. After a review of the MD&A and our chat with Roger I found out this expense was for promotional activities to raise awareness of the company’s cancer division. This costs money and I believe is needed to gain exposure. Moving forward I expect this number to remain at this higher level as there should be lots of news on the horizon.

–          Administrative salaries along with Stock based compensation decreased. We do not see this regularly and I believe it is to be commended. Instead of lining their (managements) pockets they are focusing on moving the company forward.

Key financial takeaways

Short term drivers in the stock price will be the initial sales of the TLC-2000 and speculation on caner testing which will begin in early 2015.

While I used a more conservative sales figure for the TLC-2000 Theralase will still be able to advance the cancer trials without significant dilution.  As for the stock specifically, I am expecting some selling of the stock as we progress to the end of the year. The Q3 financial statements will show another loss only because the TLC-2000 has not been sold yet. I feel as though some short term investors in Theralase may see this as a reason to unload their positions however I believe these investors are few and far between. That is why I would estimate the stock could fall only a couple cents or a maximum of around 10%. This is where we need to decide if we want to save a couple cents (at most) and have the potential to miss the move.

On a mid-term outlook, once the TLC-2000 sales have been proven, Theralase will be commencing its cancer trails. The news flow and progress of the tests, whether 3, 6 or 9 months down the road, will take over as the driving force behind the stock. This is where things could get interesting.

 

Technical analysis and specific stock price will be presented here…

 

 

Disclaimer:

Not Investment Advise is not a broker and is not affiliated with any brokerage firm. There is no assurance the past performance of these, or any other forecasts or recommendations in the newsletters, will be repeated in the future. These are high-risk securities, and opinions contained herein are time and market sensitive.

 

Readers are advised that the material contained herein is solely for information purposes. Readers are encouraged to conduct their own research and due diligence, and/or obtain professional advice. Nothing contained herein constitutes a representation by the publisher, nor a solicitation for the purchase or sale of securities. The information contained herein is based on sources which the publisher believes to be reliable, but is not guaranteed to be accurate, and does not purport to be a complete statement or summary of the available data. Any opinions expressed are subject to change without notice. The owner, editor, writer and publisher and their associates are not responsible for errors or omissions. They may from time to time have a position in the securities of the companies mentioned herein, and may change their positions without notice. (Any significant positions will be disclosed explicitly.)

 

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