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Basenese’s “Secret” San Diego NFC Security Stock

Sniffing out the mobile security pitch from MicroCap Tech Trader's Louis Basenese

OK, OK, the questions on this one are getting a bit overwhelming — and I’m afraid that if I don’t cover this one soon the villagers will soon be gathering their fiery torches and marching on Castle Gumshoe … so here goes.

Louis Basenese and the folks at Wall Street Daily are pitching his MicroCap Tech Trader by promising huge returns for a small company that he thinks holds the key to secure NFC transactions — and which will generate big licensing revenues as their key patents are put into use by Google and Apple, among others.

So what’s he talking about? Well, much of the ad is about the risks and promise of near field communications (NFC) — this is a wireless protocol, kind of like bluetooth but shorter range, that allows two devices that are typically within a few inches of each other to communicate. In practice, the consumer-facing applications are mostly smart cards (like you might use for your local transit system), contactless payment cards or keyfobs (like that little ExxonMobil keychain you can wave in front of the pump to pay for your gas), or, in the next wave of this development, NFC chips in cell phones that let you use your phone as a “digital wallet.”

In all cases, NFC security is an issue — that’s because you don’t have to hold the card or phone to connect with the NFC chip, it’s wireless and someone with a transmitter might be able to snoop on your wireless transactions or even ping your card, chip or phone to try to “hack” it to get the pertinent numbers and ID info. That’s why you see them marketing NFC-blocking wallets with layers of aluminum (or whatever) to prevent snoopers from sniffing out any cards you’re carrying, and that’s why, to at least some extent, NFC and the “mobile wallet” cell phone that you use to pay for everything haven’t really taken off yet — though both are more prevalent in some Asian and European countries than they are here.

That’s not the only thing slowing the adoption of the chip-based “cell phone as wallet,” of course — there are plenty of security concerns, but there’s also the lack of clear standards, competition among providers and payment processors and lack of easy interoperability, the rising capabilities of app-based or other non-chip payment solutions (you can pay via PayPal or your smart phone at Home Depot or Starbucks, for example, and those don’t use NFC chips).

And there’s also the simple fact that consumer acceptance of new trends is often very slow — particularly for financial products. People are comfortable with credit cards, for the most part, and NFC isn’t that much faster or easier — but debit card use only exceeded check use a few years ago, and though check use is still falling sharply there are still billions of checks processed every year by the Federal Reserve. The impatient foot tapping you do when the person in front of you in the express line at the grocery store when tries to buy two cans of tuna and pay with a check may not be necessary soon, but it doesn’t mean that person will be paying with their cell phone next year.

There are also, as you might expect, roughly a gazillion companies trying to get their foot in the door in NFC payments, whether they’re card or reader makers, software or security companies, chipmakers or payment processors or phone builders … everyone wants to have a piece if this turns into something big. And big is expected, though soothsaying the speed of acceptance is not easy — early adopters and futurists have been predicting the mass consumer rollout of the “mobile wallet” and cell phone payments for more than a decade now, the technology to use a chip in your phone to make a payment has been around for longer than “smart phones” (contactless chip-enabled payments by mobile phone were launched commercially in Japan and South Korea a decade ago — not without challenges, but they’re pretty established at point of sale terminals and in vending machines thanks to that head start at working through the challenges and the tech early adopter culture in those countries).

So that’s the backdrop, as best as I can share with you in a few moments — what, then, is the specific little company that Louis Basenese is teasing as a key player, a company that he thinks will have licensing deals, key announcements by August 14, and good exposure on Apple and Android devices very soon?

Well, for that we’ll need some clues. Unless, that is, you’d like to pop over and subscribe for $3,500?

Oh, wait, this is also one of those “we’re going to write you a check” teasers — so it’s not $3,500, it’s $3,500 minus the check for $2,650 they send you … so the newsletter is actually going for $850 these days.

But regardless of whether or not you want to pony up that kind of cash for a breakthrough-tech newsletter, I’m guessing you’d like to know the name of the stock first, right? Take away that crazy “tell me the secret now!” impulse, and make a sober decision about subscribing after a good night’s sleep? Sure, we can do that — I’m certain I won’t cover the stock as thoroughly as Basenese, and I won’t tell you whether or not to buy it, but I’m pretty sure we can identify it for you. And the price? Much more free-ish (though of course, we always delight in welcoming new members to the Irregulars, our $49 a year premium membership group — just to entice you further, those folks would have already seen the answer to this teaser and a nice quick summary in the beige box on the left).

So what are our clues from Mr. Basenese and the MicroCap Tech Trader?

Well, they’re frankly a bit thin — so we might not reach 100% certainty in our match today — but this is what we get:

“… for the better part of a decade now, the world’s corporate giants have been building the infrastructure for ‘mobile wallets’ and wireless payments to become the industry standard.

“Their logic is pretty straightforward…

“Easier ways to pay for products and services will mean more sales. A lot more sales!

“The technology powering everything is called near-field communications. Or ‘NFC,’ for short, which allows for easy, convenient payments at stores around the world.

“The heavyweights are pushing all their chips in on NFC.

“In fact, credit card giant, Visa, has predicted that people born over the past five years will never own a physical wallet.”

So the argument, basically, is that there is such a massive, global, corporate push for NFC payments that they will overcome the security concerns — and at least in part, they’ll do so using the technology of this company that he’s teasing. Or, as he puts it more floridly:

“Armed with only a smartphone, crooks can steal a mountain of credit card numbers with little more than the touch of a finger.

“More credit cards just got stolen this very second.

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“Beep. Beep. Beep.

“And the giant corporations are powerless to stop it from happening.

“They haven’t been able to develop the software smart enough to stump the crooks.

“They’ve tried everything, too!

“Enter one tiny company trading for less than two bucks.

“A company that holds every conceivable patent needed to stop these thieves dead in their tracks.

“By extension, this tiny company is also the gatekeepers to the entire trillion-dollar M-Commerce market.

“I expect The Bigs to secure this brilliant anti-theft technology for themselves any minute.”

So … any more specific clues hiding in all this puffery? Here’s what I found to feed into the Thinkolator for you:

“This time, the announcement concerns a company trading for less than $2/share….

“I’ve been tracking this company’s innovation from the very point of inception.

“I’ll see it through to its completion, too, which could happen as early as August 14, 2013….

“… this less than $2-a-share, San Diego outfit already has all the necessary patents in place…

“The biggest companies in the world MUST deal with it.

“These patents can secure their transactions, and get their $1 trillion juggernaut rolling….

” I’ll rush you that certified check for $2,650….

“You can do as you please with the money….

“… you’ll want to use the cash to purchase shares of this tiny company.

“At current prices, that’s about 1,800 shares. [note: that would be a price around $1.50]”

So that gets us partway there. A little more?

“one single investor (the man I told you about earlier) has already snatched up an amazing 38% of the company’s shares.

“Here’s the deal…

The two largest players in the smartphone market - the giants responsible for more than 94% of every smartphone in the world - are poised to start deploying this tiny, less than $2-a-share outfit’s technology.

“This company is in substantive discussions with multiple partners.

“And its ground-breaking patented technology stands to become THE standard of protection for nearly every smartphone on the planet.

And he says his “Validation Report” on this stock includes:

“Confirmation of a market-ready, antitheft prototype for the Android.

“Confirmation of the first antitheft prototype for the iPhone.

“And all the details concerning the August 14 announcement where I believe news of a partnership will hit.

“A partnership that could ultimately lead to this company’s technology protecting all Apple and Google wireless devices.”

And, of course, it’s small and uncovered:

“most everyone knows that mobile payments will ultimately become the industry standard, no one realizes that a tiny company stands as the gatekeeper…. not a single Wall Street analyst is even formally covering the stock.”

And there’s a big insider buying, we’re told:

“A short while ago, one single investor - just one - increased his stake to nearly 40% of this company’s outstanding stock.

“Nobody - and I mean nobody - takes a stake like that in a tiny company trading for less than $2. That is, unless they KNOW something big is unfolding.”

Phew! So, a few clues hiding in that mishmosh of temptation. What’s our stock?

This is, so sez the Mighty, Mighty Thinkolator, ImageWare Systems (IWSY, trades over the counter)

And yes, it’s quite small — market cap around $140 million now that it’s run up with the attention from Basenese. And it does have a 38%-owning insider, Director Neal Goldman of Goldman Capital Management (not Goldman Sachs, just to be clear), though the shares he’s added over the last year have all been options exercises.

Though they do position themselves as having a security solution for the “mobile wallet” and mobile transactions, they do so with biometrics — this is a biometric security software company that was focused initially on photo and face recognition when they were a stock market darling in 2001 and hit $14 briefly (I expect their biometrics technology is face recognition, but I’m not sure about that). The stock declined pretty gradually over the early 2000s, coming to a head when they were delisted from AMEX when the price stayed under a dollar in 2008.

They describe their main offerings related to secure identities here.

And the basic catalysts that Basenese appears to be foreseeing are described (though with perhaps less certainty) in the conference call they hosted to give a “business update” about a month ago — you can see the transcript of that call here, but the basic “upside” possibility comes from this bit from CEO Jim Miller:

“We have reached a very exciting crossroads where the cloud and mobile computing have intersected with biometrics. The rapid expansion in availability and use of mobile devices presents an incredible opportunity. As these devices have become culturally ubiquitous and nothing short of phenomenal in their reliability and robustness, the door has swung open to provide security for the myriad of transactions that occur on these devices every single day. While you can easily ascertain that it’s my phone or my device, you can never really be sure who exactly is using it. The more transactions and sensitive information that can be accessed via mobile devices, the important it is that this critical security piece of the puzzle be solved. Happily, it’s this solution that the new generation of ImageWare products addresses and solves.

“We have also continued to develop and advance our biometric secured mobile transaction technology that is built upon the patented wireless interactive messaging technology we acquired from VOCEL last year. We’ve now married this technology with our Biometric Engine and other existing foundational patents to build interactive mobile applications that can be secured biometrically.

“On the last call, we announced that we introduced the first demonstration models of this mobile technology on the Android platform to key potential corporate users. We have now a production release of our Android product and will soon release our iPhone demonstration product. We are currently in substantive discussions with several new clients regarding licensing opportunities. We strongly believe that the combination of these technologies provides yet another substantial competitive advantage for ImageWare.”

The company believes it’s on track to generate enough cash flow to cover costs as they start to sign more licensing deals (they’ve signed one so far, it appears, with global payments processor Emida), so they think they’ll have enough cash and liquidity for the year — thanks partly to a line of credit from their largest shareholder (Neal Goldman again). So I guess quite a lot is probably riding on their next six months or so of potential deals and rollout of their technology to a possibly broader audience.

I have absolutely no idea whether or not they will build a meaningful user base or achieve any kind of leadership in mobile security or authentication for mobile payments or anything else, they but I’m quite sure this is the pick Basenese is touting. It’s the very definition of a “story stock”, you certainly can’t justify the valuation based on their current business or financial position or even on the orders and deals they’ve made, it’s too early in the process to have any idea what their revenue potential might be or whether the product will become important to consumers or payment processors or retailers … but if it can grow into that story that Louis Basenese spins and generate a little tiny penny of revenue from each of billions of mobile transactions someday, well, then it’s a cheap buy with massive potential growth.

There are lots of biometric security companies out there, and lots of mobile security companies and technologies, most of which probably won’t become critically important — so you have to have confidence in the technology and the story to want to buy this. I do not know how valuable their patents might be — they bought the key patents from Vocel that they think will help them expand into the consumer market more aggressively just last year, and most of their work seems to have been with governments before that — credentialing and IDs and border authentication stuff, as far as I can tell.

IWSY has generated no meaningful amount of revenues over the past decade, and have churned through well over $100 million in losses during that time, so perhaps all that investment in their technology will come to something? That’s your call to make, let us know if you’ve an opinion to share with a comment below.

P.S. No, I don’t know if there’s anything other than guesstimates behind the August 12 date that Basenese teases — whether he thinks they’re just a couple months from more deals or product announcements (like an iPhone product), or will have an other corporate update by then (they did issue a “progress report” in mid-August last year). That’s right around when their next 10-Q quarterly report is due to be filed with the SEC, so maybe it’s just that and a hope that they’ll begin to report higher cash flow by then.

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Lisa
July 8, 2013 3:40 am

Anyone have any thoughts about Alnylam, symbol ALNY?

Roller Blader
Guest
Roller Blader
July 8, 2013 12:00 pm
Reply to  Lisa

I have info to share re SIMH doubling in the near-term. If interested I can be reached at 508-612-5647. Robert

harley
Guest
harley
July 8, 2013 3:07 pm
Reply to  Roller Blader

Simh looks to be illiquid. traded 12,000 shares today and up 20%, good luck getting out of that penny stock pump and dump!

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Truman Roper
Member
July 8, 2013 9:47 pm
Reply to  Roller Blader

Dooubling? Is that a 2:1 split or are they issuing twice the common stock shares like
Chesapeake Energy did years ago ending up screwing me with half the value the next day?

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alexm28
Member
alexm28
July 10, 2013 7:47 pm
Reply to  Lisa

ALNY Alnylam a leading RNAI therapeutic Co .S&P 4 star rating developing therapeutics based on ribonucleic acid interface RNAI for the treatment of geneticaly defined diseases.Barchart looks good .Above 50 day moving average since July.I do own stock.

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Lisa
July 11, 2013 12:26 am
Reply to  alexm28

Alex – I am intrigued by this company. According to the Oxford Club, they claim that the first person to reach the age of 1,000 (yes, one-thousand!) has already been born, thanks to the work being done by Alnylam. And it is further claimed that besides reaching the age of 1,000 years, people will have no disease, and will not age. These are rather fantastic claims, to say the least. Stock seems a bit pricey–how are they generating revenue with negative earnings, if you know? Do they have a product? I see JMP Securities raised their P/T to $44. I have never looked at this company before, but I plan to now. Anything noteworthy you may have picked up on that you might care to share, Alex?

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alexm28
Member
alexm28
July 11, 2013 11:12 am
Reply to  Lisa

ALNY jumped this morning to 42+ I took some profits

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Lisa
July 8, 2013 9:00 pm

Apple (AAPL) just announced they are cutting production of 20 million iPhones by year’s end. IWSY likely will have to revise down some of its projected income–ouch! That’s assuming they inked a deal, of course.

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Rog
Irregular
July 8, 2013 10:49 pm

Lisa, Please tell us where you found this announcement. Thanks.

Lisa
July 9, 2013 12:55 am

It was announced during the Larry Kudlow TV show after market hours on 7/8 (last night). He is on 7 PM Eastern time.

jwhooper
jwhooper
July 9, 2013 3:17 pm

Does anyone have any idea on the other stock mentioned in Basenese’s pitch? The ‘patented mobile marketing platform’ company based out of New York.

“…Based in New York, it’s the best kept secret in mobile advertising technologies.
Its patented mobile marketing platform is the only truly end-to-end product on the market. And it’s already turning heads. In the last six months, the company’s client list has swelled to over 200. Among the 200, are blue-chip names like Macy’s, Nissan, Johnson & Johnson, Pfizer, Kellogg’s, Costco and Ford.

And, yes, the company trades for a measly $0.34….”

Any ideas???

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Lisa
July 9, 2013 3:24 pm
Reply to  jwhooper

Scroll up in the messages to July 3. “Eric” said in his post that the company was Augme Technologies, Inc, symbol AUGT, because I was asking about it, too.

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Roberto
Guest
Roberto
July 10, 2013 4:01 am

To everyone commenting on this forum, thank you for all your DD, but i was wondering if we should create a forum about IWSY & SIMH??? Please let me know what you guys think. I also own KNDI and that company has an amazing story and a phenomenal forum where so much info could be found.

BTW Rolerblader, do u honestly think SIMH is a better investment than IWSY?

Hope to hear back from all of u

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roller blader
Guest
roller blader
July 10, 2013 4:25 pm
Reply to  Roberto

yes SIMH better bet at this moment based on personal info obtained directly… see my comments 49 an d50

Mike F
Guest
Mike F
November 24, 2014 9:24 pm
Reply to  roller blader

How’s SIMH doing ??

Looks like it got pumped & dumped.

Jay Hooper
Jay Hooper
July 10, 2013 9:12 am

Thanks Lisa…..and Eric!!!

Lisa
July 10, 2013 1:25 pm

Roberto–Sounds good to me. Please just let me know where to direct my attention if you do set up a new forum. I truly enjoy reading all the well-informed comments by so many. Its comforting to know there are folks so willing to share their knowledge with those of us who are a bit newer to the game–I’ve learned so much from so many already, and I’ve only been on board about 3 weeks! My thanks to all!

roller blader
Guest
roller blader
July 10, 2013 3:52 pm

SIMH vs IWSY vs AUGT
SIMH I was told to expect SIMH to be over $ 3.00 very soon (I’m thinking a couple of months). I was told that one firm will be buying 500,000 shares on the open market. That’s 2.5% of the o/s shares.

IWSY
Today I spoke with the outside investor relations person who is aware of Lou Basenesse’s writings. He’s not aware of any announcements forthcoming (and opined not to give it a grain of salt) but did confirm that Fujitsu had arranged for MSFT to test the IP at MSFT lab and as a result of the success, Fujitsu inked the deal with IWSY. No word yet about MSFT response to the tests. The face and voice IP are now part of MSFT smart phone offerings. The android product is finished and Emida has added it to their offerings. i was told that the ISWY mobile wallet is the first one with biometric and cloud technologies. I was told that IWSY management is in Europe talking with people. I was told that fund managers have been calling and investing for the long-term.
I was told to target $ 8 – $ 10 by the end of the year 2013. I was told that IWSY only needs
$ 2.5m of revenue in a Quarter to break-even.

AUGT – today I walked to the subway with a bizdev manager for “mobile marketing platform” and I should have asked his name and company. But he raves about this new way of advertising – totally wiping out the present ways this is being done. I will check into it. Thanks.

Lisa
July 10, 2013 6:30 pm
Reply to  roller blader

Roller Blader, I have a question. The gentleman you mentioned who is raving about this “new way of advertising”, was he raving about something specific that AUGT is enabling, or was his comment more about mobile advertising in general, as compared with the older, more usual ways of advertising, ie, flyers, mailers, billboards, radio, tv, magazines, etc?

roller blader
Guest
roller blader
July 10, 2013 3:59 pm

IWSY

Today I sent a letter to Neal Ira Goldman at the York, Maine address asking about the insider selling going on. I also asked Greg, the outside investor relations guy to contact Goldman and say that we little guys need some comforting comments from him. I was told that Goldman himself has been putting $ directly into the company and getting options to but shares at pennies. I was told that Goldman Capital Management was selling off shares (not Gruber et al group) so I’m confused by that. I was told Goldman has 30% of the company, not 40%. Greg the investor relations guy says everything looks very good for the long term – just jang in there and expect volatility.

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Lisa
July 10, 2013 5:37 pm

Lots to digest, and all good stuff to know, Roller Blader–thanks very much for all the effort you’ve put in with IWSY, and for sharing as well about SIMH and AUGT!

Robertovelez87@gmail.com
Guest
Robertovelez87@gmail.com
July 10, 2013 6:31 pm

Rollerblader you would be a crucial asset to the forum
I will be starting later on today, I will post the link here when I
Get to.Thank you for all your DD, especially today.
Thanks for answering Lisa, hope to see you all contribute to the new forum
Long IWSY

Berto

Lisa
July 10, 2013 11:53 pm

My pleasure, Berto–keep me posted!

Roberto
Guest
Roberto
July 11, 2013 1:03 am

Thats the website for the group everyone, hope to see you all there, lisa, rollerblader…. it will be small in the beginning but hopefully with a little promotion on social media, and word of mouth we’ll get know and hopefully new members with questions. I am getting ready to attempt to write my first paper on SA, about IWSY, i am currently so busy, but as soon as i get the rules of writing for SA, i will publish. Maybe rollerblader could also attempt to write one, i can tell he is more savvy and articulate than i am.

Group email: iwsy@yahoogroups.com

Lisa
July 11, 2013 1:18 am
Reply to  Roberto

Berto, I tried to send an email, but Yahoo said they can’t deliver. Do I need to set up a Yahoo address in order to exchange emails? Never used Yahoo before.

Roberto
Guest
Roberto
July 11, 2013 1:22 am

yeah, just go to the group page and create an account, you wont need any approval is an open forum

Roberto
Guest
Roberto
July 11, 2013 1:23 am

Send me your email whoever is interested and ill forward an invite

Robertovelez87@gmail.com
Guest
Robertovelez87@gmail.com
July 11, 2013 6:33 am

Sorry for this but as I was attempting to add you your message got deleted Lisa :(, send email again….

Robertovelez87@gmail.com
Guest
Robertovelez87@gmail.com
July 11, 2013 6:35 am

Lisa, send your email again please, technical difficulties, and your info got erased 🙁

Lisa
July 11, 2013 11:28 pm

Berto: I sent you my email address to your gmail address. Didn’t hear back from you, so was wondering if you got it or not.

Roberto
Guest
Roberto
July 11, 2013 7:20 am

Here is a link to AUGT conference call for Q2. ill also post a link on the yahoo group.

http://finance.groups.yahoo.com/group/iwsy/

roller blader
Guest
roller blader
July 11, 2013 2:33 pm
Reply to  Roberto

I just joined the group, thanks.

Lisa
July 11, 2013 4:12 pm
Reply to  Roberto

Hi, Berto. Yes, I read a February article last night by an analyst who apparently tracks the stock as a micro cap advisor. His comments were not exactly flattering, but he does give good marks for the Hipcricket acquisition, which he says is worth $1.20 alone.

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alexm28
Member
alexm28
July 12, 2013 10:15 am
Reply to  Lisa

Hi Lisa, you asked abot ALNY I sent you the info some time ago.Fr 7/12/13 Alny is up $4+
I own the stock

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Lisa
July 12, 2013 2:16 pm
Reply to  alexm28

Hi, Alex! Yes, I did get the info–sorry for not getting back sooner. Many thanks for that! I did dip a toe in the water a few days ago, and took a small position. I think this is going to be an investment for me, rather than a trade, so I will build my position over time, on dips. Its a fascinating company–makes me think we are living in the future! I very much appreciate you following up, and please forgive my delayed reply.

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alexm28
Member
alexm28
July 13, 2013 9:06 pm
Reply to  Lisa

Good luck Lisa don’t forget trailing stopps this is a must discipline to peserve gains

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Roller Blader
Guest
Roller Blader
July 12, 2013 8:24 am

I didn’t see the Feb article but if Hipcricket is their ticket to success, AUGT is a tremendous buy. If expectations are too high, then the stock does get hammered the day after their press conference.

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Lisa
July 12, 2013 1:26 pm
Reply to  Roller Blader

Here’s an excerpt that appeared in the Feb article–I already sent the link in post #61.
“Investors buying shares of AUGT in the current trading range (it closed at 29 cents last night [Feb. 26, 2013]) are buying the entire enterprise at a valuation that is approximately half the price AUGT paid to acquire Hipcricket back when Hipcricket was less than half its current size, and at a time when the mobile marketing space was still in utero. Hipcricket is indisputably more valuable than it was at that time, its highly regarded management team is taking the reins (starting tomorrow) of the entire AUGT enterprise and investors who are willing to look a little closer at this story have a chance to buy what we think will prove to be one of the biggest winners in the mobile advertising / marketing space at a market cap that is less than 1x the next 12 months revenue. We believe the Hipcricket business may prove to be worth more than $1 per share as a standalone (separate from the patent portfolio). Additionally, due to the rapid deal-making and valuations we are seeing in the mobile space, would not be surprised to see the entire enterprise acquired at a price north of $1.20 per share in the next 12 – 18 months. We believe that Hipcricket will eventually be recognized as one of the best pure plays in the mobile advertising/marketing space and believe that investors would do well to begin establishing positions now while the stock is still trading in a range that reflects the “four letter word” that AUGT came to be for shareholders seeking the IP litigation jackpot.”

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