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BeWhere Holdings: A Pulsing, Immutable NanoCap Growth Story

|Includes: BB, BCE, BeWhere Holdings Inc. (BEWFF), NOK, T, VZ

Overview:

Following our original coverage on BeWhere, the company has attracted several new deals as momentum continues to grow.

BeWhere Holdings (GNCKD) (BEW.V) is a ~5.84M CAD NanoCap company trading on The TSX Venture exchange. The company is the first to market a beacon solution providing a long range (250 meters to smart phone) weather proof enclosure (IP68 rated) and feature rich functionality using low-energy bluetooth. The offering is an alternative to the more costly RFID technology in the market today. The target use is innovative tracking, inventory management and asset tracking for business users. BeWhere is nowhere on anyone's radar, its unknown offering a first-mover investing opportunity, yet far along with businesses in a short time period since its reverse takeover only 6 months ago. With ~100 pilots underway, and industry giants as partners the company is ripe for upside potential. BeWhere is reminiscent of one of the first MicroCaps I ever invested in, a tracking company called ViryaNet which eventually got acquired.

Pilots, Agreements, Catalysts:

The company is currently focused on the B2B market since it is too time-consuming to train consumers as end users, in comparison to business users. Currently the company 50-100 pilots the market where businesses are testing their beacon technology. This is a substantial feat for a company that has only been live for ~3 months since their RTO , and 6 months total. Pilots take 2-6 months to complete so we should see some purchase orders for beacons in the coming months. Recently, BeWhere announced that Bell (NYSE:BCE), the largest wireless company in Canada, will offer BeWhere's beacons to their customer base.

The reselling agreement is in place, and BeWhere is hopeful to begin sales to Bell's customer base over the next several months. We view Bell as the Verizon Wireless (NYSE:VZ) or AT&T (NYSE:T) of the United States, granted smaller. Interestingly, giant Fleet Management companies such as GeoTab, whose devices track over 450,000 vehicles, are not squashing but coming (page 6) to BeWhere Holdings to partner for their technology. As the word's largest providers for GPS and telematics for fleet management services, GeoTab saw the value in partnering with BeWhere. The pilot with GeoTab has been underway for 6+ months, so management is expecting GeoTab to begin re-selling BeWhere's beacons very soon. The goal is to integrate with GeoTab's services and is expected to be completed in 3-6 weeks, then we will see sales from that channel.

BeWhere's margins on their beacons are impressive, with 65%+ margins as per management. Additionally, resellers can turn around and sell the company's beacons through their own distribution channels. Building upon their progress, BeWhere also has a pilot in place with FleetFreedom , a very innovative fleet management company. Additionally, the company recently announced an agreement with Blue Oceans Satellite Systems Inc. The agreement is to support a current implementation with a municipal Emergency Medical Services organization located in southern Ontario, SkyHawk has placed an initial order for 750 BeWhere beacons and 30 BeWhere Bluetooth Wi-Fi gateways.

"We are seeing rapid adoption of Bluetooth beacons as organizations realize the need to monitor not just the fleet vehicles but also the tools, equipment and inventory that are contained in their vehicles. This agreement combines our collective capabilities to provide a complete solution for asset monitoring," said Owen Moore, CEO for BeWhere. "Adding SkyHawk to our network will not only extend our reach into governments, it diversifies our product into resellers that utilize satellite communications."

BeWhere continues to execute: at the end of May the companyannounced a 2,000 beacon initial order with Mobilizz Inc as wellFor a NanoCap technology company having only been around for a few months, having 20 pilots, the largest wireless company in Canada as a reseller and fleet management companies coming to partner with the company instead of competing is a huge feat.We expect these pilots, specifically with GeoTab, to produce sales opportunities in short order.The company began selling beacons this past July and reported sales of $100,000 but the company's CEO stated he expects sales to rise to $1.2M - $1.5M for 2016 alone.

Share Structure:

BeWhere is the product of a reverse takeover that closed in February, when the company raised 2M CAD at 0.15 CAD per share, with insider participating significantly. Shares are tightly held as the founder and co-founder own 40% of the company, and these shares are escrowed for 3 years. As such there is ample incentive to develop and growth the business.

  • With 40,256,324 shares outstanding, 18,999,996 are subject to a three-year lockup, so management is incentivized to execute on the business.
  • 180k warrants at $1.50, out of the money and they expire on September 27, 2016.
  • Additional 1M Warrants at 0.25 CAD that expire 36 months after the three year escrow period. They can't be exercised before the 3 year escrow release date, so current investors are shielded from this ceiling.
  • No options outstanding.

Management:

Management has told me that they are not currently interested in hiring an IR team, which is generally a good sign since they are not looking to pump the stock and want to grow the business instead. I had the opportunity to speak with Mr. Moore at length and his passion and expertise in the industry is second to none. Chairman and CEO Owen Moore owns 21.27% of BeWhere Holdings. Previously Mr. Moore was president and founder of Grey Island Systems international before it was sold in October 2009 for just under 40M CAD. The company was a manufacturer and seller of real-time internet-based vehicle monitoring and predictive arrival systems. Under his supervision, the company saw a 50-fold increase in revenue to $24M. In November 2012, Mr. Moore joined BSM Wireless as the executive VP of Sales. BeWhere Holdings President Chris Panczuk owns 21.11% of the company. He started in the telematics industry in 1998 and was with BSM wireless until 2014. Most recently he was the Vice President of Enterprise Sales at BSM Wireless. BSM Wireless is a major GPS fleet tracking and asset management solutions company, whose solutions are used to track over 70,000 assets in 40 countries. Having both worked at BSM Wireless in executive positions, both founders have significant industry experience they are leveraging.

Burn Rate and Breakeven Level:

The company's shell had 310K CAD in cash dedicated to the reverse takeover and transaction fees. Following the $2M raise at 0.15CAD, warrants at 0.25 per unit, the company has ~1.45M CAD in cash left per the company's CEO. With a virtually insignificant burn rate of 50K CAD per month, the company has plenty of cash for the next 12+ months. The company's CEO expects the company to be breakeven at $1M in revenue.

The Solution: BlueTooth Beacons

BeWhere's beacons provide real-time information on equipment, goods or tools in transit or at facilities at a level of operational visibility that was unavailable in the past or too costly for a number of industries such as construction and emergency services to transportation.

BeWhere's Beacons Versus RFID Chips:

RFID chips use a form of NFC (near field communication) to interact with readers and scanners. Currently, RFID chips are the norm in the business realm. BeWhere's bluetooth beacons have considerable advantages over RFID, and some faults, that make them more than competitive with RFID technologies. While BLE Beacons cost $20-$35 to make, one beacon can service a large area up to 250M. Whereas RFID tags may be cheap at $0.05 per tag, but each tag has to be placed individually on a high number of products. BLE beacons also do not require the costly scanners and antenna necessary to work with RFID technology that costs between $100 and $3000.Instead of explaining the technology in a comparative argument, check out the below infographic on BLE (bluetooth beacons) vs NFC (RFID chips subset).The advantages are clearly being understood in the marketplace due to BeWhere's partnership with fleet management giants (Bell, GeoTag etc) and the 100 pilots currently underway.

Risks:

Normal NanoCap risks apply to BeWhere Holdings such as price swings and illiquidity. Other risks include running out of cash, although with a low burn rate and warrants at 0.25CAD which can provide money into the company we see this as a non-issue currently. Other risks include increased RFID competition, but due to the technological advances in BLE Beacons we view BLE beacons as being competitive in the marketplace. Lastly, fleet management companies could develop their own BLE beacons technologies, although since they are partnering with BeWhere its clear the company has an advanced offering, and it is not worth the intensive R&D spending to develop on their own. Also, per management the company has patents pending for the solution.

Conclusion:

BeWhere Holdings LLC is a significantly undiscovered, NanoCap gem, who has made significant progress in only several months of being a public company. With 20 pilots live, fleet management companies coming to partner with the company, and huge resellers in place (Bell, Fleet Freedom etc), the company is well positioned to be successful. We foresee purchase orders for these resellers' clients beginning over the next few months. Run by two leaders who have significant industry experience, BeWhere's ship is driven by highly capable captains. This is demonstrated by the progress the company has enjoyed thus far. With their shares escrowed for three years and owning 40%+ of the shares outstanding, they are well incentivized to execute and create shareholder value. With the risks noted, BeWhere Holdings is a SecretCaps NanoCap exclusive. We are currently long shares.

Video Overview:

Disclosure: I am/we are long GNCKD.

Additional disclosure: DO not trade or invest based upon this content. This content is strictly educational and informational and is not investment advice. SecretCaps was not compensated for this report by any party.