Inventergy Global Inc., the intellectual property investment and licensing company run by CEO Joseph Beyers, may soon have to raise capital in order to run its business.
The Campbell, Calif.-based company reported net cash used during the first six months of 2014 of $4.57 million. It was down to just $484,175 in cash and cash equivalents as of June 30, 2014.
The company also held restricted cash of $3.5 million, which was pledged to collateralize $3 million of convertible notes issued to Hudson Bay Capital Management.
The notes are secured by a first priority lien on all the assets of Inventergy Global including 667 patents acquired from Shantou, China’s Huawei and Kadoma, Japan’s Panasonic Corp.
They pay interest at 4% a year, which can be reduced to 2% if the company meets certain requirements. They also are convertible into common stock at $7.50 a share.
Hudson Bay also was among investors, who participated in a $2.75 million private placement of convertible preferred stock in December 2013. Other participants included Empery Asset Management, Alliance Funds Inc., Melechdavid Inc. and individual investors.
The preferred shares are convertible into common stock at $1.07 a share, which represented a 5.3% discount at the time.
On Aug. 8, Inventergy Inc., a unit of Inventergy Global, closed a $500,000 unsecured loan from First Republic Bank that Beyers agreed to personally guarantee. The loan accrues interest at 1.3% per year and is due before Nov. 1, 2014. Beyers’ guarantee was secured by assets he owns.
The company also has previously financed itself by borrowing from Beyers.
In December 2013, Inventergy Global issued $3.1 million in promissory notes to Beyers. The notes were scheduled to mature in February 2014, but were extended to August 31, 2014 and bear interest at 2% per annum. The company fully repaid the $100,000 unsecured related party note as part of the December 2013 notes.
The $3 million note was secured by certain patent assets of the company and all principal and accrued but unpaid interest on the December 2013 notes were due upon maturity.
On February 10, 2014, the company obtained an unsecured $3 million promissory note from Beyers, which also matured on August 31, 2014 and bore interest at 2% per annum. Effective February 11, 2014, the December 2013 notes and note receivable were fully offset and deemed paid.
Shares of Inventergy Global fell 11 cents to $1.83 on Monday, Sept. 22, giving the company a market value of $43.8 million.
The company said in its financial statement for the quarter ended June 30, 2014 that it “will be able to conduct its planned operations using currently available capital resources for less than six months.”
Beyers said in an interview that investors “shouldn’t assume we’re doing an equity raise.”
He said he spent time working in mergers and acquisitions and planning and strategy at Hewlett-Packard Co. and considers himself “very astute in cost of capital and return on capital.”
“The model here is I’m focused on getting capital on the right terms,” he said. “The capital to raise is too expensive at these prices.”
Beyers stressed that he has been willing to fund the company personally in the past and would be willing to do so again.
“I’m a source of capital and we have assets that have large value,” he said.
Inventergy’s assets currently have little debt attached to them, he said.
“You have to assume I’m working hard on revenue deals,” he said.
Asked whether that meant an equity capital raise was off the table, he conceded that “nothing is off the table.”
Beyers said his priority for raising capital starts with himself.
“Clearly, the best source of capital is cheap capital from me and then debt and the last is equity at these ridiculously low prices. I probably shouldn’t say ridiculously low.”
Inventergy Global was founded by Beyers in February 2013. Prior to founding the company, Beyers spent 34 years at Hewlett-Packard and led its IP licensing business for many years.
Inventergy Global’s strategy is to acquire patent portfolios from global Fortune 500 companies to generate value from the portfolios through licensing or sales of the patents.
The company has acquired 756 patents from three major companies to date including 182 patents in fixed and mobile communications focused on Internet Protocol Multimedia Subsystems, or IMS, from Huawei.
It also purchased 497 patents from Panasonic in Mobile Broadband 3G and 4G Technologies. In addition, it bought 83 patents in fixed and mobile communication focused on IMS from Espoo, Finland-based Nokia.
Inventergy still owes those companies $21 million for the patents through 2017 including payments of $1 million this year, $4 million in 2015, $6 million in 2016 and $10 million in 2017.
The company has said it has raised $21 million from founders, institutions and accredited investors.
The $21 million includes $8 million from two debt financings and $13 million from three equity financings.
Beyers currently has 6.7 million shares of Inventergy Global, which amounts to about a 28.6% stake, according to a filing with the Securities and Exchange Commission.
Microcap financier Barry Honig owned 1,248,565 common shares of Inventergy Global, or a 5.22% stake, according to an Aug. 21, 2014 filing.
Over the last year, Beyers has assembled a team of former licensing professionals and IP lawyers which he hopes will give Inventergy Global the credibility to reach settlements more easily with licensees.
Inventergy Global said in a securities filing that its salaries, wages and other personnel expense were “$724,428 and $449,234 for the three months ended June 30, 2014, and June 30, 2013, respectively, an increase of $275,194 as a result of additional headcount.”
To be sure, Inventergy Global’s new rub on the old patent assertion business model so far has yielded no results despite discussions with 20 possible infringers.
In July, Inventergy Global filed an infringement action against Genband Inc., a Frisco, Texas-based privately-held developer of Internet Protocol multimedia application software and infrastructure products for fixed wireline, mobile, and cable network service providers as well as large enterprises.
The action, which was brought in the U.S. District Court for the Eastern District of Texas, alleges infringement of Inventergy Global’s patents focused on Internet Protocol Multimedia Subsystems, or IMS, and Voice Over Internet Protocol technology, or VoIP.
The company said in its most recent financial statement that it “has not yet served the complaint, in favor of newly expanded discussions with Genband.
Beyers said the company has still not served the complaint and is “pleased with the progress of our actions.”
Inventergy Global was initially incorporated as Silicon Turbine Systems LLC in January 2012. It subsequently changed its name to Inventergy LLC in March 2012 and it was converted from a limited liability company into a Delaware corporation as Inventergy Inc. in February 2013.
On June 6, 2014, a subsidiary of eOn Communications Corp. merged with and into Inventergy Inc. As a result of the merger, eOn Communications changed its name to Inventergy Global Inc.
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