Bravatek Solutions Inc (OTCMKTS:BVTK), the cyber security company, rebounded at the end of August as a result of two relevant announcements. The first announcement was regarding the release of a Strategic Alliance Agreement with AmbiCom Holdings Inc., which will help the company increase the top and bottom lines. Additionally, the company released its most recent quarterly earnings release for the period ended on December 31, 2016.
The share price experienced a decline in the beginning of the month of August as a result of some shareholders booking profits. We did not receive any other announcement indicating a reason for the price drop, thus the share price decline, in our opinion, was just a technical move. We believe that an update on the company may be interesting for those who may be thinking of a buy-the-dip play:
Let’s review again the business objective of BVTK for those who are reading about the company for the first time in this article. The company provides cyber-attack protection to companies and governments through its main product; Ecrypt One. We said the following about it in one of our articles called “Bravatek Solutions Inc (OTCMKTS:BVTK) On The Verge Of A Breakout“. Have a look:
“Ecrypt One brings a more convenient and secured alternative to the traditional Microsoft Exchange that many organizations and individuals use. Many Security Officers and Compliance Officers have already understood that operating servers are receiving more and more attacks nowadays, thus using mail servers not provided by Windows or Mac is becoming very popular. Cyberattack WannaCry that infected many big institutions in May 2017 was the most recent evidence.” Source
On August 24, 2017, the company signed an agreement with AmbiCom Holdings, Inc., a Nevada company headquartered in Santa Cruz, CA. We had access to the agreement and assessed the terms and conditions included. In general, the terms of the contract say that Bravatek will help AmbiCom introduce its products to prospective clients in the government space nationwide, while AmbiCom will list Bravatek in all appropriate sales and marketing materials as a non-exclusive alliance partner (with focus of government customers). Additionally, both companies will develop and implement a joint product solution, and application strategy.
Have the companies worked together before?
Usually, joint ventures, mergers and business agreements work out when the two companies have worked together. When the technical teams know each other, everything is much better, as the contract is only a formal agreement to note a business relation that has already occurred. We were glad to find out that AmbiCom had already worked with BVTK and its other affiliate “Voosh LLC” has also worked with the company. This is what we said in our previous article called “AmbiCom Holdings Inc (OTCMKTS:ABHI) Is Another Play On Bravatek Solutions Inc (OTCMKTS:BVTK):”
“AmbiCom Holdings, Inc. has two affiliates; Bravatek Solutions, Inc., which is a security-platform company that offers software and we have largely discussed it in several articles; and Voosh LLC, which provides cloud based optimization software. This is key to understand what happened recently with the share price.” Source
On December 31, 2016, the market received the latest quarterly earnings release, which was interesting to read. The most remarkable item was the income statement.
- Sales, related party: $50,534 ($465 reported in the same period in 2015)
- Cost of services: $54,259
- Total Operating Expenses: $112,587
Additionally, we had a look at the balance sheet and found that the most significant part of the asset side are intangible assets:
- Property and equipment, net: $30,988
- Intangible assets, net: $21,774
- Derivative liabilities: $2,144,913
What are these intangible assets?
We found in the company materials that those intangibles refer to software development costs:
“Costs for software developed for internal use are accounted for through the capitalization of those costs incurred in connection with developing or obtaining internal-use software. Capitalized costs for internal-use software are included in intangible assets in the consolidated balance sheet.” Source
For those interested in the amount of shares and the risk of dilution, here is the information provided in the last 10-Q:
- Series B preferred stock: 350,000 Shares Authorized, and 264,503 shares issued and outstanding as of December 31, 2016 and March 31, 2016.
- Series C preferred stock: 1,000,000 Shares Authorized, and 319,768 shares issued and outstanding as of December 31, 2016 and March 31, 2016
- Common stock: 10,000,000,000 Shares Authorized, and 1,265,448,353 and 998,236 shares issued and outstanding as of December 31, 2016 and March 31, 2016 respectively.
Additionally, we saw in the balance sheet a large amount of net operating losses accumulate: $19,362,500. This helps the company in the future, as it reduces the amount of taxes to be paid.
We believe that both the agreement signed with AmbiCom Holdings, Inc. and the amount of sales reported in the 10-Q created the share price reaction seen at the end of August. We revisited the agreement and found out that both companies have worked together and also have another collaborator in common, Voosh LLC. In our opinion, this is a good sign, as it shows that both companies know each other well. Additionally, we had a look at the large amount of NOLs reported and highlighted the fact that tax liablities could be reduced. Almost $20 million in losses makes BVTK a very attractive takeover target as it also reduced the tax liabilities for any company that acquired BVTK. The company gets BVTK’s technology and a tax deduction at the same time. Considering that BVTK has a current market cap of just $33 million, investors need to keep this in mind when evaluating BVTK.
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Image courtesy of Georgia Business via Flickr
Disclosure: We have no position in BVTK and have not been compensated for this article.