QIS Update #35 2014 - December 9th 2014
Included in this update:
- Blackbird Energy provides Elmworth update, closes two tranches of non-brokered, flow-through financing
- NTG Clarity Networks announces software development agreement, engages Quinsam Capital as strategic financial advisor
- Virtutone Networks coverage by Fundamental Research Corp.
As mentioned in our last update, we’ll be posting more regular weekly recaps in the QIS Capital Forum on smallcaps.ca at www.smallcaps.ca/forum. The most recent weekly forum posting was added on Dec. 8th. These updates include links to any recently issued updates and to any recently updated corporate profiles or research reports. We touch on some of the news and financial results that we expect out in the near future. We also incorporate some current events that affect small-cap stocks. In addition, at the end of each weekly forum recap, we discuss some stocks to watch that may be worth your time in performing some additional due diligence.
Fundamental Research Corp. (FRC) has recently initiated coverage on Virtutone Networks Inc. (VFX:TSX-V). There’s some very detailed information in the report and FRC has assigned a fair value to VFX shares of $0.51. The company’s shares presently trade in the $0.14 - $0.17 range. To receive a copy of the full 19-page report, please contact us directly at firstname.lastname@example.org or (250) 377-1182.
The TSX-Venture touched a new 10 year-low today surpassing the low from the 2008 crash. Since September 1, 2014, the TSX-Venture Exchange has fallen by a whopping 33%. Much of the decline has been felt by the oil and gas and mining industries, although broad based selling in other segments has been felt in recent weeks.
Please feel free to email us anytime at email@example.com or call us at (250) 377-1182. We look forward to your comments, questions, and feedback.
Blackbird Energy Inc. (BBI:TSX-V)
Current Price: $0.275 (coverage commenced Aug 19/11 - $0.18)
Blackbird Energy Inc. has announced that its first 100% working interest horizontal Middle Montney well at Elmworth, located at 6-26-70-07W6 (6-26), has been successfully drilled and cased with a cemented liner from surface location 14-14-70-07W6 to a total measured depth of 4,730 metres, including a 2,000 metre horizontal leg.
Blackbird is also pleased to report that it has licensed and spudded its second 100% working interest horizontal well at Elmworth, located at 5-26-70-07W6 (5-26), targeting the Upper Montney. The 5-26 well was spudded from the same drilling pad located at 14-14-70-07W6 and will be drilled to a vertical depth of approximately 2,340 metres, a lateral length of approximately 2,000 metres and a total measured depth of approximately 4,740 metres.
As previously announced, completion operations for both wells are scheduled to occur in January 2015, subsequent to which Blackbird intends to flow-test both wells. Flow-testing results for both wells are expected by late February 2015.
The 6-26 and 5-26 wells are located within Blackbird's 46 contiguous section Montney land block at Elmworth, near Grande Prairie, Alberta.
Closing of Final Tranche of Flow-Through Private Placement
Blackbird has also completed the second and final tranche of the previously announced non-brokered flow-through share private placement, issuing 3,300,000 shares at a price of $0.45 per share for gross proceeds of $1.49 million. The aggregate amount of shares issued pursuant to both tranches of the Private Placement was 16,150,555 at a price of $0.45 per flow-through share for aggregate gross proceeds of $7.27 million. Post-closing of the Private Placement and the drilling of the 6-26 well, Blackbird has approximately $42.5 million in positive working capital and no debt.
Garth Braun, Blackbird's Chairman, President, and Chief Executive Officer stated, "With the completion of the Private Placement, Blackbird has further strengthened its balance sheet and is well positioned in this challenging commodity price environment to continue its growth and aggregation strategy in the Elmworth corridor".
The available proceeds from the Private Placement will be used by the Company to incur eligible Canadian Exploration Expense (CEE).
In connection with the final tranche of the Private Placement, the Company paid a cash finder's fee to various arm's length finders in the aggregate amount of $74,250. All of the shares issued pursuant to the final tranche of the Private Placement are subject to a four month hold period expiring April 9, 2015.
Blackbird Energy Inc. has announced that it has completed the first tranche of the previously announced non-brokered flow-through share private placement (the Private Placement) issuing a total of 12,850,555 shares at a price of $0.45 for gross proceeds of $5.78 million.
The net proceeds from the Private Placement will be used by the company to incur eligible Canadian Exploration Expense (CEE).
In connection with the Private Placement, the company paid cash finder's fees to various arm's length finders in the aggregate amount of $277,782. All of the shares issued in the first tranche of the Private Placement are subject to a four month hold period expiring April 5, 2015.
Blackbird currently expects to complete the second and final tranche of the Private Placement for gross proceeds of $1.48 million promptly.
QIS Capital: While those who participated in the latest $0.45 financing may not be happy with the recent decline in Blackbird’s share price, the company has successfully raised over $44 million in the last two months in what has been a very challenging financial environment. This is a testament to the quality of Blackbird’s Montney holdings and the success of the company’s institutional market penetration in recent months. While the investment environment is not ideal while the company drills the two most exciting wells in its history, we do expect continued high interest from the investment community as results from these wells gets closer.
NTG Clarity Networks Inc. (NCI:TSX-V)
Current Price: $0.315 (coverage commenced Feb. 4/10 - $0.045)
NTG Clarity Networks Inc. has announced that the company has signed a frame agreement with a stock trading house in Qatar for the development of back-end software. Under this agreement NTG Clarity will supply development and quality assurance resources for this new customer to improve their operations and customer service.
The first Purchase Order under this agreement is estimated at $150,000 CAD with work to be completed within the next 6 months.
"We are very pleased with this initial contract as it opens new opportunities in an emerging market for us," said Ashraf Zaghloul, NTG Clarity’s Chairman and CEO. "While we have been generating modest revenues from our Qatar office, which just opened in February 2014, this contract will bring the Qatar office into a profitable position which will contribute to the Company’s corporate profitability heading into 2015."
QIS Capital: NTG Clarity continues to report new orders which should continue the company’s momentum with financial performance. This new contract is a great addition to the Qatar office which is now expected to contribute to earnings in the next fiscal year. NTG Clarity also signed an advisory agreement (explained below) with Quinsam Capital. We will be working with Quinsam Capital to increase NTG Clarity’s exposure primarily with the institutional market.
Quinsam Capital Corporation (QCA:CSE)
Current Price: $0.175
Quinsam Capital Corporation (QCA:CSE) has announced a new advisory agreement with NTG Clarity Networks Inc. (NCI:TSX-V) and provided an update to investors for the month of November 2014.
Advisory Agreement with NTG Clarity Networks
NTG Clarity has engaged Quinsam as a strategic and financial advisor effective December 1, 2014.
Roger Dent, the CEO of Quinsam, stated that "NTG Clarity is exactly the kind of company we like to invest in and work with. We initially invested in NTG some months ago and have increased our holding since then. The Company has been reporting increasing revenue and earnings yet in our opinion is undervalued and underappreciated. NTG has significant exposure to fast growing international IT markets, which diversifies its business outside Canada. We look forward to working with NTG and assisting the Company with the execution of its business plan."
Quinsam will develop and implement a strategic program to raise NTG's visibility and advise on the execution of the Company's business plan. The agreement has an initial term of six months, which may be extended upon the mutual agreement of the parties.
Quinsam is a merchant bank based in Canada. Its merchant banking business may encompass a range of activities including acquisitions, advisory services, lending activities and portfolio investments. Quinsam currently holds 390,000 shares of NTG Clarity Networks for investment purposes.
Quinsam undertook several important new investments in the month of November.
We acquired convertible debentures in Payfirma Corporation, a rapidly-growing private company in the payment facilitation space. We participated in a financing along with several insiders of the company. We expect the company to seek a listing in 2015, at which time we will have the option of converting our debentures at a very generous discount of 25% to the go-public price. In the meantime we earn a 15% coupon.
We committed to a long-brewing financing by Zaio Corporation. The financing has been an overhang on the stock for quite some time and in our opinion was priced on very attractive terms. The financing will allow Ziao to complete some key strategic acquisitions. The unit included a very generous full warrant.
While we have been reluctant to invest in mining in recent months, we are seeing compelling value in some revenue-generating small producers. While we do not plan on making mining an area of significant investment, we did make an investment in and assisted with the structuring of a very attractively-engineered debenture issued by Newlox Gold Ventures Corp. The debenture offers full convertibility plus full warrant coverage. We see the potential for this company to generate very strong near term cash flow in the context of its valuation.
The Company closed November with a total unaudited portfolio of over $2.4 million compared with $2.4 million at the end of October. Quinsam has some modest exposure to the oil & gas sector, which offset much of the month's progress elsewhere in the portfolio. We also funded our first dividend in the month.
"We were very pleased generally with the Q3 results announced by our investees in November. NTG Clarity Networks, Photon Control, Titan Logix, Sangoma and Northern Frontier were among the companies reporting solid results," said Roger Dent, CEO of Quinsam.
November, like September and October, was a very difficult market for Canadian small cap stocks. The general negative market tone was exacerbated, we think, by signs of year-end tax-loss selling," said Mr. Dent. "While tax loss selling at this time of the year is a recurring factor, it can often be followed by strong results in late December and the early part of the new year."
An important component of our business strategy is the accumulation of purchase warrants at little or no cost. With the purchases of Newlox and Zaio in November, Quinsam's warrant portfolio grew to over 6 million warrants from approximately 2.1 million at the end of October. We value unlisted warrants at intrinsic value, which we see as being a conservative approach.
Disclaimer: This article is for informational purposes only. The information contained within this article should not be construed as offering investment advice. Those seeking direct investment advice should consult a qualified, registered, investment professional. BOEs may be misleading, particularly if used in isolation. A BOE conversion ratio of 6 Mcf: 1bbl is based on an energy equivalency conversion method primarily applicable at the burner tip and does not represent a value equivalency at the wellhead. The company profiled assumes no liability for the information presented. This is not a direct or implied solicitation to buy or sell securities. Readers are advised to conduct their own due diligence prior to considering buying or selling any stock. The author(s) owns directly or indirectly 169,000 shares, 706,348 warrants, and 350,000 options of Blackbird Energy Inc., 1,471,000 shares and 100,000 options of NTG Clarity Networks Inc., 912,000 shares of Quinsam Capital Corporation and 531,000 shares and 212,500 warrants of Virtutone Networks Inc. QIS Capital may have a financial relationship with these companies and may trade in the stocks mentioned. No stock exchange has approved or disapproved of the information contained herein. Copyright © 2003 - 2014 QIS Capital Corporation.