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Micro-Cap Digest: Private Placements Vs Self-Funding, And A Red Flag At Ivrnet?

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Companies are strengthening their war chest's by issuing new shares; this digest provides color.

Specific Portfolio Updates:

Self Funding vs Private Placements:

Last week we had an intensive digest covering BeWhere, Atman and how we sold Spectra Inc. Make sure you read it over as its a predecessor to this digests' updates.

There is a "go-to fact" in the MicroCap industry. which is that self-funding MicroCaps are preferable since they are afforded the time to execute without having to dilute shareholders. Also it is very hard to raise money in the microcap realm, making the terms (pricing, warrant attachments) generally unfavorable.

Many of our MicroCaps are self funding (Direct Insite's legacy revenue is funding the 4th generation roll out of Paybox for example).

Although there are situations in which a private placement can be a key growth bullet the company needs without being detrimental. For example, UrbanImmersive's momentum and solution's rapid and successful uptake has led to its private placement to fuel growth which should be synergistic.

Further, AtmanCO's raise offered the potential arbitrage opportunity (shooting for the PP price to come in above our .05 buy in). The PP for Atman also offers the ability to purchase a cash flow positive business which is set to be synergistic in many areas.

While self-funding MicroCaps are truly the gold standard, private placements don't have to be "off the table" when it comes to your investment decisions. Just make sure:

Private Placements - Make Sure:

• The terms are attractive

• You're not overly diluted

• The funds will be used for growth, not to extend an inevitable failed business plan

• The company can actually close the private placement (lack of interest is a killer)

AtmanCo:

Due to the excellent news last week, Tom and me (Sujan) are thinking about adding to our positions. We have put in low bids at 4.5 and 5 cents, hoping to get filled soon. We still don't know at what price the company will issue new shares, but you'll be among the first to know.

The company has the Voxtel acquisition pending, and the 2.5M CAD raise pending as well.

BeWhere Holdings:

First of all, Tom added to his position at 13.5 cents. We noticed that the stock briefly dipped to 11 cents intra-day in a spike down. According to our research, this was due to a sudden margin call triggering market orders in the process. This can be brutal in an illiquid nano-cap, as seen in the market. Maybe it pays off to put in a low stinker bid?

Also, BeWhere released earnings this past week. (All figures in Canadian dollars)

As noted in our report, the company's numerous pilots and reselling agreements are the focus of the new company (as such sales were negligible for the period).

With $1.3M+ in cash and a burn rate of $430K, the company has plenty of cash for the next 3-4 quarters as sales come in and pilots turn into deals.

The company's loss for the quarter of (1,246,713) is deceiving since it includes the listing expense of $954,103 linked to the company's reverse takeover of the original business (GreenRock Resources). This is a one time event and was priced originally through 6,526,659 shares at $0.15 per share - so investors can purchase shares at .14 in the open market below the RT price.

The company also has ~1.1M options at 0.15 which will likely (its only ~$155K so we doubt this is a hurdle). The company also has 8.3M warrants priced at 0.25 and a small portion at 1.50. So at the current 0.14 PPS these are both a non-issue.

The company is on track, and we are excited for the company's numerous pilots and reselling agreements in place, especially with Bell.

Ivrnet:

A solid update by Ivrnet. The company is generating revenue from its NEXTEXT platform, which has already generated 15M messages to transit riders over the past 3 years.

We believe Ivrnet could be a multi-bagger. - See Report

Side note, we came across an item in Ivrnet's cash bonus incentives section that 50% of any net income over $1,000 gets divided up among the company's executives at the discretion of the board.

We're not sure if $1,000 is supposed to mean $1M, but other numbers in their information circular are expanded. We reached out to management and am waiting to hear back.

Its not as if many MicroCap investors are awaiting their potential dividends (most investor for PPS appreciation), but 50% of the NI to executives is a lot of money that the company can not reinvest.

Its likely $1,000, and its hard to think the board would do so, but then why include it as a pot sweetener. We're waiting to hear back.

This digest is a few days old since it was released first to PRO members. We have since found out this was a mistake on Ivrnet's part and they are working to fix it. It also appeared in last years circular. It shows how deep we dig, and that we found this item first!

Urbanimmersive

Urbanimmersive announced a pilot project with TC Media:

Shares edged higher at C$0.20. Our buy-in was at C$0.04 and we're still long. We hope Urbanimmersive is able to close the private placement soon.

I (Sujan) called the CEO, he is genuinely super optimistic about this company. There's ample interest in the pp, which he hopes to close soon. I believe they will. Even after a huge run-up, this stock could still easily double or triple from current levels.

Reliq Health:

Check out our recorded CEO Video interview with Lisa Crossley and a product demo on iUGO if you haven't already!

Bigger Capital:

BiggerCapital, a renowned private investor, shares his story on biotech nano-cap ProMis on SecretCaps!

Multi-Billion Dollar Microcap Opportunity Hiding In A Dark Alley

SharpSpring:

SharpSpring reported that 4,000 businesses are using its flagship marketing automation platform, up from 3,000 businesses in early 2016.

The company is successfully taking on its billion dollar competitors Marketo and Hubspot since it gives agencies more control, SharpSpring is cheaper, and the offering is comparable or better in many respects to their competitors.

(Original research report)

Zacks is on the SharpSpring train as well. Granted SecretCaps gave it to you first!

Research Solutions:

RSSS released that they fully plan to focus on SaaS in 2017:

"Research Solutions' new SaaS offerings represents a natural evolution for the company, enabling us to expand into multiple new and lucrative market segments," said Peter Derycz, President and Chief Executive Officer at Research Solutions. "We are confident that our existing blue chip customer base will benefit from the new SaaS offerings, and also help us to shape it into a blockbuster research intelligence platform."

Research Solutions currently serves greater than 70 percent of the world's top 25 pharma companies and several Fortune 500 companies, including two of the Fortune 10. The company plans to launch a BETA version of the new SaaS solution in the first calendar quarter of 2017.

Watchlist:

Determine reported earnings this week. While the company is high on our watchlist, their losses ($4.8M loss on $6.7M in revenue) in the 4Q is a red flag for us. The company is planning to cut expenses which could set the company up for a solid report, but we are hesitant. We continue to dig on this name.

Check out our latest articles:

Reliq Health Technologies: New Leadership Driving a Recent Acquisition Offers a Potential Inflection Point

BeWhereHoldings: A Pulsing, Immutable NanoCap Growth Story

AtmanCo: Past Personality Is An Indicator Of Future Results

Eight Reasons Why Direct Insite's Earnings Call Has Us Bullish

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Broader Micro-Cap Market:

The IWC is a good 1% down on Brexit fears.

Lesson Of The Week:

Dig for special deals for management in the SEC/SEDAR filings.

Holdings Not Listed In Our Portfolio:

Memex (OEE.V), UrbanImmersive (UI.V), AcuityAds (AT.V), Ivrnet (IVI.V), RSI International Systems (RSY.V), AtmanCo (ATW.V), BeWhere Holdings (BEW.V or BEWT)

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