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CloudTag Inc: THE INVESTMENT CASE

CloudTag progressing at the double

The shares ended 2016 at 8.89p having started it at 3.66p. Backers have consistently exercised warrants to acquire more shares.
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INVESTMENT OVERVIEW: CTAG The Big Picture
The share price performance has set pulses racing

Shares in wearable technology specialist CloudTag Inc (LON:CTAG) soared in 2016, as excitement grew over its Onitor Track device.

The shares ended 2016 at 8.89p having started it at 3.66p. Throughout the year, the company was successful in securing backers for its technology.

The most recent package was provided by L1 Capital Global Opportunities Master Fund, which received debt securities in return for financing worth £1.4mln.

The financing put CloudTag in a position to start manufacturing the product. To date, only a few of the devices have been made to showcase the product at the geek-fest that is the Consumer Electronics Show, better known as CES.

CloudTag Track uses grade ECG (Electrocardiography) technology, allowing for accurate assessments of heart rate and energy expenditure. It can be worn on the wrist for daily tracking and on the chest during exercise. A one hour charge gives it life for three to five days.

Good for fitness fanatics, its use can be extended into the weight loss arena where accurate calorie readings are required.

A series of patent applications have been made in the UK to protect the intellectual property, while product validation came via research carried out by the sports performance unit at the University of Essex.

The next phase of CloudTag's development is securing distribution deals and getting into production.

It is fair to say the company has experienced some teething problems in the latter, which is not uncommon with new technological devices.

It has secured a European distributor, Second Chance, and the initial plan was for a chunky order to be placed in 2016. A decision to switch manufacturing operations contributed to the order not being placed, and the new plan is to hold off on manufacturing large quantities of the device until such time as firm orders are received from retailers and distributors.

For its part, Second Chance wishes to firm-up orders from its own customers before committing to a firm order with CloudTag. 

The company also secured a deal CITIES, one of the largest commercial distribution operators in North America.

"From our point of view this agreement is to CloudTag the entry needed to the largest wearable market in a very focused manner.... to reach 70% of potential US consumers with one relationship " said Amit Ben-Haim, chief executive of CloudTag.

Ben-Haim said the relationship with CITIES will grow further as they work together to create a new category in wearables: weight-loss.

"We are the first in this category at the device stage so from the viewpoint of the retailers,  Best Buy, Target, Walmart and at a later stage Amazon, the retailers will gain more potential sales" he told Proactive Investors.

In the meantime, the company has been receiving a steady flow of money from L1 Capital exercising warrants that it received upon conversion of its loan notes into shares.

Most recently, L1 converted £300,000 of loan notes into 4.62mln shares at a conversion price of 6.5p, and exercised warrants over 2.88mln CloudTag shares at an exercise price of 6p a share, raising £173,077 for CloudTag.

The conversion of the loan notes triggered the issue of further warrants to L1.

L1 still holds £800,000 of CloudTag convertible loan notes.

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CloudTag Inc Timeline

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