Towerstream Corporation (NASDAQ:TWER) Looks Strong With Tech Shift

This one's an interesting one. Towerstream Corporation (NASDAQ:TWER). Over the last few quarters, Towerstream has essentially turfed out its legacy operations, and shifted to a completely fresh technology underpinning its offerings. The new technology affords it the opportunity to be a price leader in the space in question, and there is a huge addressable market just waiting to be sold to.Here's what you need to know.The company is a business wireless internet provider, operating in various locations, including New York City, Boston, Chicago and Houston. With its new tech, called OnNet, it can install a set of signalling equipment on the roof of building, and then offer wireless internet to all of the buildings within range of its equipment. The company targets high profile, tall buildings in major cities (the taller they are, the wider the range and the higher the potential customer base), installs its equipment, then sets its sales team loose on all of the tenants of the buildings within the range of said equipment. Here's the kicker: the cost to these tenants is at circa 40% of their currently available options.Joseph Hernon has been the Towerstream CFO since 2008, and he described the situation best in the company's latest earnings conference call:

Everyone's selling gasoline at $2. We're selling it in the same building for $1.

Towerstream has its kit on top of some of the premium skyscrapers in the US - the Empire State building, MetLife, both Hancock skyscrapers in Chicago and Boston, the Prudential Center and the Aon towers in Chicago and LA – and has around 250 buildings as things stand. Going forward, however, management has qualified another 4,016 buildings, housing a little over 145,000 tenants.That's 145,000 businesses that the company's sales reps can approach and pitch less than half price broadband at the same (or in some cases, better) speed and reliability than they currently receive.First quarter financial just hit, and things look promising. Revenues came in at $6.73 million, and gross margins widened -19.85% to 24.57% compared to the first quarter in 2015. Year over year earnings growth came in at just shy of 38%.So what's the downside? Well, capitalization. The company has just shy of $35 million debt on its balance sheet, and only around $9 million cash. It’s got about one and a half years' worth of physical equipment in its warehouses ready for new installs, but even with this equipment already purchased its burn during the first quarter totaled $3.5 million, and with a small reduction looks set to hover at between $2-2.75 million for the foreseeable future. This gives it about twelve months (at the outside) before it needs to raise operating capital.We just saw a raise sell 15,000,000 shares (although these have now converted to around 750K shares post a 1:20 reverse split) and the same number of warrants issued at a 5-year exercise price of $0.25 (again, this is now higher based on the split). At current prices these warrants aren’t dilutive, but if the company hits its own targets, they could quickly become so, and to a pretty steep extent.We expect further raises to be on similar terms, despite management claiming they will push to make terms as non-dilutive as possible, and this has to be taken into consideration before committing early stage capital.All said, debt is an issue, burn is high (but lowering) and dilution is all but a certainty, but fundamentally there's a lot of growth potential. Sales team execution is key.Stick with us for updates on how many tenants Towerstream can add to its roster of clients – sign up below and we'll keep you in the loop. You'll also get a free eBook. Don't worry, we hate spam too.Disclosure: We have no position in TWER and have not been compensated for this article.