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Thursday, October 6, 2022

INFRASTRUCTURE Play Social Detention (OTCMKTS: SODE) Gaining Mileage

Social Detention. Inc. (OTCMKTS: SODE) and its core business have been around for years growing organically by bidding on California government jobs for prisons, parks, and roadways etc. The company, which works closely with the Department of Transportation, had been quietly trading around the .02-.03 range in the early part of 2020 until it made an electrifying press release that jolted the OTC world in mid-March of this year as it soared to $.92. 

The shocking news revealed their planned acquisition of Danliv Inc, a business licensed to conduct EV, Hydrogen and Green Projects, such as charging stations.  The terms of the acquisition were outlined, via a stock purchase agreement that was executed on 3-11-20 and the stock price of SODE opened at .04 and hit a mid-day high of $0.92 while trading 36.8 million shares on the day. The news certainly turned a few heads.   

Social Detention Inc. (OTCMKTS: SODE) shares were soon forgotten as cryptocurrency and oil and gas plays caught the attention of OTC traders. The company has not followed up with news since that release nearly 5 months ago and its share price slowly slid back to the .06 range (almost a 95% pullback from the high of 0.92).

With President Biden’s latest $1.2 Trillion Infrastructure Bill passing in the Senate and heading next door to the House of Representatives, investors have been scurrying the market screeners looking for solid infrastructure plays. If that wasn’t reason enough to do some ticker searching, $3.5 trillion is also on the menu for more in depth infrastructure needs. Based on the simple fact that the government will have an “open wallet” for spending, Social Detention once again has started drawing some attention as a potential candidate to land future contracts which is why the press release in March deserves a second look.

The Danliv Inc. Deal

This was a stock exchange of restricted shares.  The missing ingredient in the press release was the size of the deal in terms of number of shares.   Investors should assume it was a fixed deal.  The deal was expected to close months ago, but  the sudden retracement of the stock price may have weighed down the official closing of the transaction for tax purposes.  There is nothing to suggest in the press releases or the company’s communication that the deal is off.  In fact if the deal was off they would have been required to issue an 8-K.  They have not issued an 8-K and because they “anticipated” closing in Q1 investors need to wait for the announcement of the definitive closing.  With the passage of the infrastructure bill it’s almost a given that the announcement of the deal closing will be shortly thereafter.  

There are clues of activity when analyzing the last 10-Q which covered the period ended March 31, 2021.  The last quarter ended with 183,753,000 common shares and 12,000,000 shares of preferred stock.  The total authorized share count is 200 million shares and according to OTC markets the latest count is 197,753,333 out of 200,000,000 authorized shares.  So it’s very possible that this deal got done for the 15 million shares that were increased.  Given the current stock price that is close to $1.0 million in consideration for the deal.  For the past 3 years the share count hasn’t moved at all until now.  Dilution on SODE has historically been extremely mild.  The next quarterly report is due very soon and that could be a potential catalyst as investors realize the deal may have already been consummated.

The true value of the Danliv deal lies in the licenses.  All these licenses are needed to effectively bid on any of these government projects.  There are surely to be small business set asides for companies the size of SODE so it’s a perfect recipe for growth. Most of Danliv’s competitors are just electricians we’re assuming, with most of the potential earnings coming from the soft costs for each facet of the project. When teamed with Social Detention, they can do the whole job from start to finish including construction, assembly, permitting and not just the electrical segment of the project.

“Danliv Inc. provides us the vehicle to obtain and perform EV, Hydrogen and Green Infrastructure Projects not only in California but on a national level as well. This marks an important step forward for Social Detention Inc. and opens up opportunities for growth and revenue recognition.” – Robert P. Legg II, CEO Social Detention, Inc.

California’s Goal to Have All Electric Vehicles by 2035

President Biden announced an executive order last week that aims to make half of all new vehicles sold electric by 2030. The move is part of Biden’s larger plan for taking action on the climate crisis and has the backing of U.S. automakers. Not a legally binding mandate and more of a voluntary pledge, it remains to be seen how much progress will ultimately be made in helping lower greenhouse gas emissions. On September 23, 2020, The Office of the Governor Gavin Newsome announced an executive order that directs the state to require that, by 2035, all new cars and passenger trucks sold in California be zero-emission vehicles. (www.gov.ca.gov

Many Democrats urged Biden to pursue a similar order, which is closer to those adopted by other countries, but he resisted. We wait for further information and Biden’s executive order and what impact California’s own policies and growing electric vehicle industry will have on the national plan. What we do know is that Social Detention and Danliv Inc are well positioned to capitalize on the EV push in California and hopefully expand into additional states if not nationally.

Exposure to Bitcoin with Bitplaza Shopping App

Social Detention Inc. announced in April of 2019 it had executed a Memorandum of Understanding to acquire Bit Plaza Inc. Bitplaza was the world’s first Bitcoin dedicated shopping app on the Apple App Store and Google Play. The shopping app uses cutting edge technology which allows anyone around the world to buy physical goods with bitcoin, from the latest electronics to even groceries.  Although many retail giants are now adopting the idea of accepting bitcoin as a means of payment, Bitplaza app was the first of its kind and is definitely a target for ecommerce platforms looking to grow its customer base, especially one who are crypto related. Bitplaza claims to be actively growing the global shopping platform and building new partnerships with brands that are looking to accept Bitcoin payments on the App store.

Two months later, SODE followed up with a press release stating BitPlaza was experiencing tremendous growth as their daily downloads for the app were up 200% from the previous time period. As we all know the bear market hit crypto in late 2019 and Bitcoin fell to $3500 in March of 2020 so it’s of no surprise that we have not heard anything more about the app. On an optimistic note, Bitcoin is now flirting with a $46,000 price range and the app is still downloadable on the iTunes app store. Customers can download the app or visit Bitplaza’s operated websites @ www.bitplazashopping.com & www.bitcoinpike.com

Investment Summary

For the time being investors should consider Social Detention as an infrastructure play. It seems pretty clear that the deal with Danliv has closed and they simply are going to recognize it in the next 10-Q or wait until final passage of the infrastructure plan by congress. The company seems to be prepared to launch a bidding campaign once passage is final.  California is pushing the electric car agenda pretty hard which means charging stations and the grid have to be built out ahead of time.  This could be low hanging fruit for Danliv as they await the Request for Quotations from the government which will almost certainly include the construction of charging stations.  The company currently has a $15 million market cap and just one of these infrastructure projects could be a game changer for the company.  There is a good risk to reward ratio with an operating company that has no potential for dilution and considerable upside should they secure any infrastructure project. 

Disclosure: we hold no position in SODE either long or short and we have not been compensated for this article.

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