TS03 Inc Trust Units TSTIF

Valuation

[Blue_Sky]

Lets have a look at valuation and what the recent 510K approval should mean for the value of TSO3 and why we remain significantly undervalued. One of the best ways to do this is look at another precedent approval. The best case study for the recent duodenoscope claims might just be the 510K approval for TSO3 back in July of 2016. The company was awarded its last 510K approval on July 4th (a U.S. Holiday!). The stock opened on that day at $2.40 and closed at 2.95, hitting an intra-day high of 3.03. The shares rose 22% on the news. The company added $50.6 M in market value on the very first day post announcement. Shares hit another high on July 8th closing at 3.29 or +37% from the July 4th announcement date. In aggregate in just 4 days following the last 510K TSO3 had added 82 M in market value. By July 20th shares hit recent annual highs of 3.84 or +60% from the July 4th announcement. The companys market capitalization at this time was approximately 353 M. In total, the company had added 132 M in value from the first 510K approval announced in early July 2016. It is also worth noting that 16.5 M shares traded between announcement date and the 3.84 high reached on July 20th. Based on a precedent transaction TSO3 last meaningful 510K approval was valued by the market between 51 M at the very low end (added shortly after the announcement) and 132 M at its very high. To put those values into perspective TSO3 shares were trading at 79c the day before that AWEFUL Q1 print and duodenoscope 510K approval. If the market were to value this 510K in line with the last milestone approval then the shares should be trading at least at 1.35 (52 M in cap) to 2.22 per share. We can all argue why this approval is far more meaningful than the one announced back in 2016 which would add even more potential upside to our shares! We dont need to get into why the shares still remain as depressed as they are at 95c. I have harped on these issues and the lack of credibility and confidence we all have for Ramblin and his team several times. Its one thing to look at the markets reaction to one event and apply it to another but not always the best way to make a compelling valuation argument. The way companies should be properly valued is most often on how valuable their revenue, cash flow and earnings are on a relative and absolute basis. Again, I will use the precedent 510K transaction as a baseline for valuation. Partially on the back of the last approval in addition to other reasons TSO3 received to annual Purchase Orders from its partner and a USD7.5 M upfront payment for the exclusive right to license and sell the VP4. The purchase orders from 2016 and 2017 resulted in annual revenue of 13.3 M and 19.73 M or cumulative 33 M. If the former 510K was a significant reason for TSO3 to receive 33 M in orders then what might the potential sales pipeline look like near term for the most recent 510K win. Lets value the prior revenues at 3x (a healthy multiple for a med-tech growth company). At 3x...the $33 M in sales would be worth $100 M or ~1.10 per share. If we just assume that the value of the prior 510K and the follow on sales from the last 510K despite a dysfunctional partner and sleepy team at TSO3 then what might the new claims be worth. 2x...3x...5x? The point I am trying to make is that any way you slice and dice the numbers TSO3 remains significantly undervalued. We could argue that the company is even worth more today than it was back in the summer of 2016. In order for the market to wake up to this undervaluation we are going to need Rumble to deliver a new agreement with a partner(s) and calm the market fears over a dilutive financing. Oh, I almost forgot...we need this management team to deliver on some sales! If we can accomplish some if not all of these objectives I think I have painted a pretty clear path to significant upside to the share price.