HS Stock

In the world of tech ideas, everyone has already moved on from using paper-based solutions and has been toting iPads to their job for years. But ideas are not reality, at least not yet. Newly-listed HealthSpace (HealthSpace Stock Quote, Chart, News: CSE:HS), an already profitable junior, is on the ground and doing the blocking and tackling that will allow a portion of the healthcare industry instantly to move into a world of greater efficiencies and benefits. The company is taking on the lucrative inspections business, something that has been in its DNA for years as a provider of solutions to environmental health agencies. Using HealthSpace's app and a tablet, inspectors can move from paper toting grunts filling out forms in triplicate to mobile warriors who swiftly and effortlessly sync their data to the cloud. It's a big market, there are 4500 Environmental Health Departments in North America, and more than 3,000 are still completely paper based. HealthSpace will begin trading on Monday Nov 30th, under the symbol HS on the CSE. Cantech Letter talked to HealthSpace CEO Warwick Smith about the rollout of the company's app, the potential to apply it to other verticals, and how the real play in the mix might be big data. Warwick, can you tell us about the history of HealthSpace? HealthSpace has been providing a SAAS (Software As A Service) model enterprise solution to Environmental Health Agencies for over a decade. The company has grown to become an industry leader in this dynamic space providing data management solutions to over 300 Environmental and Public Health Organizations across North America. What problem is HealthSpace trying to solve and how is it different than what the company did in the past? The HealthSpace product historically has allowed environmental health agencies to be more efficient in their business processes and work flow, by moving from paper, to electronic data collection, both in the office and in the field. We became involved with HealthSpace three years ago after my partners reviewed the company and were attracted to the core business and the government contracts that were in place. The fact that all of the company’s contracts are government based is a very attractive component. They are high quality in that they always pay and the company has experienced no churn rate. Last year we completed an asset purchase of an iPad and Android tablet app technology for health inspectors to use. It is the only Apple and Android app in the space. It provides numerous revenue streams for us, but for now, let’s focus on what it does for the inspectors, who are the primary users of this technology. An inspector no longer has to do inspections with pen and paper or go to do inspections with a laptop. They can now use a tablet which is more ergonomic for the job in addition to increasing the speed and efficiency, a benefit that is attractive to the Health departments. It also leverages the latest cloud technology to allow the data collected to be quickly synchronized to the cloud (the main database), where inspections can be immediately emailed to the customer or posted online. There are solutions available that allow inspectors to use a laptop but as you can imagine this is a cumbersome approach when they are inspecting refrigerators, stoves etc. What most departments have found is that using a laptop actually slows down the process. Can you tell us about the app? What kind of functionality does it have? The HealthSpace Touch App is the only one of its kind for Environmental Health Departments. Inspectors can now inspect restaurants without the need to use pen and paper and fill out forms in triplicate and return to the office to input the information into a computer. It also allows the departments to go mobile without having to incur the cost of a data plan on each tablet deployed. There are solutions available that allow inspectors to use a laptop but as you can imagine this is a cumbersome approach when they are inspecting refrigerators, stoves etc. What most departments have found is that using a laptop actually slows down the process. The HealthSpace Touch app is available in the Apple App Store and the Google Play Store. So inspectors can now use an iPad or similar device to efficiently perform an inspection. It is a robust app that offers drop down menus that feed into feature screens based on violations. There is also the option to take photos of the violations. These photos can be marked up on screen with the app, storing an original photo to ensure the integrity of the original photo is not compromised in any way. This provides for detailed service to the customer and ensures proper food safety and handling. The old adage “A picture is worth a thousand words” is very true in this environment where a violation may be present in a very busy or cluttered workspace in a restaurant kitchen. How will the data portion of the company work, can you give‎ me an example? The data that is collected during an inspection is very beneficial in many ways. It can be used for educating the operator of a restaurant, is useful for the consumer when making a choice of where to eat , as well as a host of other purposes. Currently this data is not easily attainable by individuals or corporations. A data sales strategy is a very lucrative one and an avenue that we are actively pursuing. Selling the data is very high margin. There is more than one end user, or client, for this type of data and we are currently in discussions to execute on this exciting initiative. Once we get to the 100,000 inspection mark and have implemented our data monetization strategy we have projected the ability to produce monthly revenue north of $500,000 at lucrative margins from data sales alone. How will Health Space scale? For example, how will the business change when you are at 100,000 inspections or more? We believe getting to 100,000 inspections is an achievable goal within the first 12 months of our public listing. The App has expanded the number of agencies that are either negotiating, or contemplating negotiating, a contract with us. This means more inspectors doing more inspections with our app which equates to an increase in the number of inspections in the HealthSpace cloud that can be monetized. Once we get to the 100,000 inspection mark and have implemented our data monetization strategy we have projected the ability to produce monthly revenue north of $500,000 at lucrative margins from data sales alone. Continuing to aggressively market the app, including possibly moving it into other markets, will be a cornerstone of our growth plan over the next 18-24 months. You have only talked about one vertical. Are there other verticals that need inspections? How many different kinds of businesses can use this? Environmental health agencies have many other programs that they license and inspect, such as public swimming pools, tattoo parlors, long term care facilities, schools etc. In fact, the average department licenses and inspects 12 different types of facilities that are frequented by the public. All of these regulated facilities require inspections to be done on a routine basis. In addition, the private sector holds much promise. All major restaurant and hotel chains, cruise ships, casinos etc. all do their own independent inspections as part of their QA process to try and stay one step ahead of government inspections. The goal of these programs is to mimic the government inspections as much as possible. This makes for an attractive opportunity for our software as it is already configured to the government regulatory standards allowing chains to standardize their internal inspection process. These verticals are ones that we either are or will be looking to penetrate as we move the company forward. State Departments of Agriculture is one vertical we have yet to discuss. In 2008 there was an E. coli outbreak in a peanut processing facility in the US. In 2011 the FDA passed the Food Safety Modernization Act, issuing grants to states to participate in the program and conduct a specific new federal inspection for food processing facilities. The FDA requires that the data be collected and submitted electronically. HealthSpace has incorporated all of the requirements of this act into the app and is the only company to have done so. This is a potential lucrative revenue stream for us to pursue over the next twelve months. The data we collect is valuable and there is a lot of it. The margins are high and it gives us the opportunity to dramatically increase our revenues and margins. How are you breaking down the size of the market? There are approximately 4,500 Environmental Health Departments in North America, of which over 3,000 are currently completely paper based. This means that a large portion of the addressable market is just beginning the transformation process from paper to digital. With the mobile app HealthSpace is ideally positioned to capitalize on this opportunity and gain market share quickly. On the data side of the business roughly 10 million health inspections are done each year in the United States alone, making the data side of the business an area where rapid growth can be achieved. What is your main competition right now? Paper-based solutions? There are other mobile solutions, as mentioned above, that are primarily laptop based solutions. There’s only one other tablet oriented solution and it needs to be connected to the internet at all times. This is not a very workable solution due to the cost of a data plan on each device. It also does not work well in the real world because if you lose your signal, even briefly, you lose all of the work you have done on an inspection up until the point the signal dropped. As you can imagine, this happen quite often as you are in and out of fridges, basements etc. How much have you raised and at what valuation? We raised a total of $3,500,000, the bulk of which was raised at $0.20 or a $6 million pre-money valuation. Those shares are the only free trading shares in the company. The private company shares are locked up for a 3 year period with the first escrow release coming due six months after trading. What is your burn rate? We are in and out of profitability right now and close to break even. We spend roughly $200,000 per month all in. A portion of the proceeds of our fundraising is going towards retiring some of our debt on the balance sheet which will help reduce our burn rate substantially. What do you hope to accomplish in the next 12-18 months? Data monetization is a large part of our story in the next twelve to eighteen months. The data we collect is valuable and there is a lot of it. The margins are high and it gives us the opportunity to dramatically increase our revenues and margins. The enterprise business is growing, as seen by our recent increase from $1.6 USD million in recurrent revenues five months ago to $2.0 USD million in recurrent revenues today. Our mobile app has just been launched. Our intention is to get it into as many hands of health inspectors as we can. Not only does it provide us a new subscription revenue stream, but it allows us to collect the data which we can then resell. We’ll continue to evaluate the other companies in the space for possible mergers and take overs. The others in the space don’t presently monetize their data (They can’t as they don’t work off of a cloud based system so they don’t access the data themselves) so acquisitions can be very accretive for us with our systems in place. Disclosure: HealthSpace is an annual sponsor of Cantech Letter.

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