Spiral Toys Inc (OTCBB:STOY) Is Today's OTC Focus

Source: Spiral Toys Inc

Spiral Toys Inc (OTCBB:STOY) has been the subject of a number of promotional email campaigns over the past several months. Unfortunately, shares have not been able to breakout of their trading range. The latest promo email from Beacon Equity went as far as saying, "Which gets me thinking it might reward a little patient pressure from little traders like us. Keep at it!" In other words, STOY is going to have deliver some big news to get shares rallying.

Spiral Toys describes itself as "a California-based company with a business, founded by a former senior executive of Disney and Sony, focused on developing and marketing products and mobile applications in the mobile-connected space. Spiral's mobile-connected entertainment platform connects physical items to today's top mobile devices through wireless technologies, creating a new kind of interactive user experience. Spiral sells its products worldwide, and is developing additional applications based on its platform technology for several different verticals within the entertainment industry. Spiral collects revenue on both the physical purchase of goods and the sale of digital content through Apple's App Store and the Google Marketplace. The company also acts as co-developer with major entertainment studios."

STOY aims to be a play on the "Internet of Things" theme. In January, the company introduced Wiggy, a mobile-connected piggy bank for children. The product introduces the concept of saving at an early age by combining a toy piggy bank with an interactive mobile app and a linked bank account. Through the mobile app, parents, grandparents and other friends and family can securely deposit funds to a child's bank account for birthdays and holidays, or to reward the child for great school grades and completing their chores.

Through the Wiggy app, parents can easily set up a reward system, where tasks and chores provide a way for a child to earn money. Money can be transferred from the parent's bank account into their child's account when they complete tasks and chores. Parents will also be able to invite friends and family to make deposits on any special occasion, like birthdays and holidays. The app allows children to check their bank account balance and set savings goals.

Advertisements featuring Spirals' Internet-connect piggy bank will run on Google's digital advertising platform consisting of Gmail Sponsored Promotions and AdWords, as well as Google search, display ads and YouTube. Spiral will collaborate directly with Google's digital strategy team in order to maximize their online advertising tools designed to bring new products to market. Wiggy will also be marketed across social media channels, including Facebook, which will be spearheaded by Indri, a software-based marketing platform specifically designed to drive retail and eCommerce sales while providing valuable data analytics.

In February, STOY introduced TubeFriends, a line of ultrasonic-enabled toys that uniquely interact with videos created by YouTube stars and personalities. TubeFriends positions Spiral Toys to capitalize on YouTube's growth by introducing the industry's first-ever collectable toy that interacts with popular YouTube channels. TubeFriends have the ability to listen for ultrasonic audio triggers that have been specially embedded in YouTube videos. While inaudible to the human ear, the trigger is recognized by the toy, which responds with entertaining actions, such as audio messages, flashing lights or vibrations that enhance the video experience. The technology supports a dialogue between the toy and the video, giving the users a discovery based experience. CEO Mark Meyers said:

"Overall, we now expect to bring a total of four new products to market in 2016, including the April launch of Wiggy and TubeFriends' launch later in the second quarter. With our expanded product portfolio, improved marketing approach and aggressive sales strategy our goal is to be cash flow break even by the end of the third quarter of 2016."

Currently trading with a market cap of $15 million, STOY reported $5.96 million in revenues for 2015, up from $269,000 in 2014. This increase was driven by the production launch of the CloudPets line during the second quarter of 2015 and continued shipments throughout the remainder of the year. Gross margin was 16.9% for 2015, generating gross profit of $1.0 million. Going forward, gross margins related to its product sales are expected to be higher than 2015 as Spiral anticipates owning more of processes involved in the production and sale of their toys including advertising, manufacturing and distribution.

Spiral Toys is indeed an interesting story on the OTC markets. While the company lost $2.4 million last year and $3.4 million in 2014, STOY still managed to end 2015 with $187k in working capital. If the company can reduce its losses and ramp up revenues from Wiggy and TubeFriends to go along with CloudPets, STOY could break out of its trading range to the upside and be a microcap runner this year. We will be updating Insider Financial as soon as we know more. For continuing coverage on STOY, sign up for our free newsletter today and get our next hot stock pick!

Disclosure: We have no position in STOY and have not been compensated for this article.