It used to be that every time we saw a mass shooting in the US, like at a public event or at a school, we’d see a wave of “this is the company that can stop those attacks” pitches from newsletter teasers… but now, sadly, we’re so accustomed to these attacks that they don’t really jar the public consciousness for very long, and they’re soon out of the “news cycle,” so there hasn’t been as much marketing around them.

Not none, though, so this one caught my eye — it’s from Ryan Stancil, who is a new name to me (he’s one of the editors at Research Stock Digest, which is the firm Nick Hodge and Gerardo Del Real started when they left the Outsider Club/Angel Publishing a couple years ago), and Stancil’s email leads into the ad with this language …

“It’s a uniquely American problem that seems to get increasingly worse every year. But there are companies who are setting out to do something about it….

“One company in particular offers an AI-driven security suite compatible with existing security networks. Its pilot program reduced crime by a whopping 45% in a neighborhood in Mexico and the company only wants to scale up from there.

“It’s a spin-off of a household name in the tech sector, and this startup is set to make early investors very wealthy.”

And that email leads into an ad for Profit Cycle Pro ($79/yr), which talks up “AI” in general but mostly focuses on the potential for a “Intel Spinoff” to soar because of this crime-fighting power. According to the website, the two editors running Profit Cycle Pro are John Carl and Ryan Stancil, and much of the focus is on macro market trends, but they also highlight picks from other editors so it’s really the “entry level” paid subscription from this publisher… I’d assume that this probably started as a Nick Hodge recommendation, given that it’s a private company investment. This is from the order form:

“This Intel spinoff is offering private shares to select investors — and this is your chance to join us in making triple-digit gains (or higher).

“We’ve done this before… making 551% on the sister project of this company when it was still private, just a few months before it launched its IPO….

“Today’s opportunity is a ‘re-run’ of that original success, but to a bigger, broader market.”

And though they show a chart of the “sister company” being a huge win, apparently this spinoff being discussed here is a “private company” that only Nick Hodge and co. can tell you about…

“This Intel spinoff is still a private company — and it’s only thanks to our private investing expert Nick Hodge that we were able to find out about this opportunity.

“These $1 shares give you an exclusive piece of this private company.

“They’re easy to buy, and the special report will show you everything you need to know.

“The funding window is closing soon…

“And this is your ONLY chance to be a part of it.”

The “sister company” that they refer to is clearly VSBLTY (VSBY.CX, VSBGF), which was (and is) a penny stock that is trying to sell its smart display technology as both a marketing tool and a security tool, with AI processing of surveillance camera feeds that can both tell the system how to market to people and identify weapons or other threats. It has mostly been deployed as a marketing tool, with displays in convenience stores, mostly in Mexico but now expanding with some customers in the US, but as a “security” pitch the idea has mostly been that they could use it in schools or at big public events (like in stadiums), and one of the few real-world uses was in integrating the technology into security camera networks in Benito Suarez, Mexico, as essentially a test platform back in 2019.

And as the frequently-promoted VSBLTY stock has come back to earth from the wild ride it took in late 2021, part of that security business has effectively been spun out into a new private company called Radar USA that is still partnering with VSBLTY (they’ve licensed the software that runs their system from both VSBLTY and a company called Radar App, with larger licensing fees due as soon as they raise $15 million or more, and their primary expense has been consulting fees to VSBLTY so far, which makes it appear that they’re essentially a spinoff of VSBLTY). And Radar USA is now raising money, which is almost certainly the “private fundraising” that Nick Hodge is talking about. They’re using the Dealmaker platform to run their own Reg A+ offering, trying to raise $20 million at $1 per (non-voting) share. I have not seen any indication or filing from the company about how much demand there is for this offering, but it’s been live since July 7, 2022, and it does not appear to have an “end” date for the offering at this point. It is a Reg A+ offering, which means they can raise money from pretty much anybody, you don’t have to be an accredited investor (though you can invest more if you are accredited, should you wish), and the minimum investment is $1,000 (for 1,000 non-voting shares).

This is really a startup, they recently filed their Annual Report for the year ended October 31, 2022, and that report indicates that they have not yet sold anything — their goal is to sell subscriptions to their surveillance software (which connects individual cameras and mobile phones to an AI-powered system that somehow tracks crime, and can notify police), and also, when selling to customers who don’t yet have hardware in place (cameras, basically), to also sell them the hardware (which would just be a pass-through, they aren’t developing their own cameras or other hardware). The pitch seems largely to be “AI-fueled neighborhood watch on steroids,” which creeps me out when it comes to privacy… but I don’t even like the idea of having a doorbell camera that films the street all the time, so I know lots of folks have different opinions about the steady creep of surveillance.

They say they’re spending about $100,000 a month building the business, which mostly seems to be consulting fees paid to VSBLTY and a couple other partner companies that are owned by board members, and they rent their office space from VSBLTY. Their “launch” included having four commercial customers of VSBLTY assigned to Radar USA in 2022, but they had not generated any revenue under those customer contracts as of October (and maybe as of February, though that’s not certain).

The board includes representatives of both VSBLTY and Radar App, who did the work in Mexico City that they’re using as their primary evidence of past success, and as a group they own most of the shares (execs and directors, including the 24% of Radar USA owned by VSBLTY, own 70% of the company). It looks like they did some kind of equity raise in 2021, selling about 13.26 million common shares for an average of about 15 cents a share, and they’re now trying to ramp up considerably by selling 20 million non-voting shares for a dollar each.

And as to the effectiveness of this security software? Well, I can’t say that I really know much about the world of surveillance software or AI-driven camera monitoring technologies, but I will say that essentially all of their argument is based on that pilot project in an area of Mexico City — this is the wording for that claim of “45% crime reduction” (from Radar USA’s case study on their website):

“Lic. Mario Enrique Sanchez Flores, the Executive of the Coordination of Governance office of the Benito Juarez municipality, noted a direct impact on more than 200 incidents of high-impact crimes since 2019, generating a constant reduction in criminal events.

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“He credits the ShieldBJ program, and the effectiveness of the RADAR App/VSBLTY security solution in assisting the Benito Juarez municipality to achieve a 45% reduction in incidences of high-impact crimes, and an increase in the community perception of security from 51% to 72%, positioning Benito Juarez as the second-highest in the perception of security at the national level and the highest within Mexico City for more than a year.”

According to that Annual Report filing, “No subsequent events have occurred subsequent to the balance sheet date through February 28, 2023” … I would assume that means they have still not generated any revenue or made any more sales since October, but maybe not. Their interim report back in October (data through April 2022) did say that they have made their first sale: “The Company realised its first sale on May 8, 2022 to the tune of $45,180 for its SaaS (software as a service) licensing, monitoring and camera hardware equipment” … but that apparently did not turn into “revenue” by the time the Oct. 31 data was compiled for the Annual Report (which came out February 28, still had a “zero” revenue line, and did not repeat mention of that May 8 sale), so maybe they haven’t delivered anything or billed that first customer yet, or maybe the sale fell through. As a promotional early-stage company I would assume that any additional orders would be trumpeted from the rooftops, but maybe that’s not the case… perhaps they have dozens of customers lined up, and just haven’t told us yet.

As is usually the case, the Annual Report and the offering documents filed with the SEC are pretty sober and makes clear that they are at an extremely early stage of trying to raise money for a business they would like to build, and the Investor Presentation gives a much glitzier impression of a product that’s about to be deployed worldwide.

I don’t know how much progress Radar USA has made in raising funds since this share sale started last year, they don’t include any update on the equity raise in their latest filings. If you’re in love with the story, I would imagine you have plenty of time to think it over — they are still obviously in the very first stages of trying to build a company.

And as is always the case, I should include the standard warning that should always headline any story about a private offering: If you opt to buy shares of a private company, you should assume that you won’t ever be able to sell them.

Here’s how they put it in the offering agreement, the wording is fairly standard… but it is the most important thing to know about investing in any private offering for shares of an unlisted company, particularly for folks who are used to being able to sell their investments if they change their mind or realize they made a mistake:

“THIS INVESTMENT INVOLVES A HIGH DEGREE OF RISK. THIS INVESTMENT IS SUITABLE ONLY FOR PERSONS WHO CAN BEAR THE ECONOMIC RISK FOR AN INDEFINITE PERIOD OF TIME AND WHO CAN AFFORD TO LOSE THEIR ENTIRE INVESTMENT. FURTHERMORE, INVESTORS MUST UNDERSTAND THAT SUCH INVESTMENT IS ILLIQUID AND IS EXPECTED TO CONTINUE TO BE ILLIQUID FOR AN INDEFINITE PERIOD OF TIME. NO PUBLIC MARKET EXISTS FOR THE SECURITIES, AND NO PUBLIC MARKET IS EXPECTED TO DEVELOP FOLLOWING THIS OFFERING.”

If you love the idea of Radar USA, of course, you could always buy shares of VSBLTY instead — they aren’t profitable either, but they do at least have some revenue, will get a little boost in licensing revenues if Radar USA becomes a viable business at some point in the future, and they own a good chunk of the voting shares of Radar USA… and VSBLTY stock is now back to being even “cheaper” than it was at when we covered it back in 2019 for an Outsider Club teaser pitch (Hodge was still at Outsider Club back then, though the pitch was from another Outsider Club pundit, Jason Simpkins, who continued to tout the shares through 2021). And just to give you some indication of how these kinds of stories work out in the long run, here’s the flip side of that chart that Hodge includes in the lead-up to the current ad — he highlighted the huge 551% gain from late 2019 to October or November of 2021, which is where his chart cuts off, and I have no idea whether Hodge or Simpkins managed to sell, or recommend a sale to their subscribers, anywhere near those 2021 highs, but it quickly got less rosy after that:

Still, of course, VSBLTY is a far safer investment than Radar USA… if only because the shares are listed on the stock exchange, so they can be sold as well as bought (even if it’s just the tiny Canadian Securities Exchange, which has been where marijuana companies hide for the past few years, and even if there probably isn’t much liquidity, being able to sell is better than not being able to sell). VSBLTY is also far from being a profitable or sustainable business at this point, which is why it’s a tiny little $20 million company trading for nine cents a share, but it does at least have a bit of revenue… and over the past year or so, revenue has been over $1 million per quarter. Yes, that’s in Canadian dollars, and they’re still burning several million in cash on their operations as they try to build a company, so they’re a long way from breaking even, but having revenue is better than not having revenue. I can’t say I’m particularly interested in investing in either of these companies at the moment, but I’d be much more willing to speculate on a penny stock than to participate in a private offering for non-voting shares of an even smaller pre-revenue company.

That’s just me, though, and it wouldn’t be surprising if you wanted to make a different choice — it’s your money at risk, of course, so you get to make the call. Interested in this Radar USA private offering? Think partner VSBLTY looks appealing these days? Ready to wash your hands of both? Let us know with a comment below… thanks for reading!

P.S. In case that “Intel” part is what caught your eye, I should note that no, as far as I can tell Radar USA isn’t really directly a “spinoff” of Intel in the way that you’re thinking, where Intel created them as a public company as a way to offload part of their business, though both VSBLTY and Radar USA and another company that collaborated with them in Mexico, AustinGIS, do have technology partnerships with Intel and use Intel edge processors (VSBLTY has gotten awards from Intel, and is referred to as a “collaborator” and a “channel partner”, for example), and sometimes imply that their companies were “spun out” of Intel. None of the Radar USA directors or named employees/executives came from or worked at Intel.