As the financial markets open today in Australia, a 3D printing company is expected to join the ranks of Qantas and BHP Billiton.
333D (ASX:T3D) plan to use the reverse merger format to acquire the legal form of previously suspended company Oz Brewing Limited and begin trading shares. Reverse take-overs are a completely legal, although somewhat rare, way for a company to list on a stock exchange.
While many legitimate companies use the approach to raise finance or offer investors additional liquidity, reserve takeovers can also be ared flag to investors, auditors or others on the look out for fraud.
333D are resellers of Airwolf 3D FFF printers, and distributors for Prodways products including the MOVINGlight range of DLP 3D printers. The company also sells the CreoPop 3D pen alongside 3 own brand FFF machines.
The history of these own brand machines is contested.
Dispute with Inventor
In October 2015, 3DPI’s theneditor Michael Molitch-Hou reported on the story of Jason Simpson。辛普森已经构建了一个原型即可3D printer that caught the attention of businessmen, John Conidi and Frank Pertile.
Conidi and Pertile have held executive positions at a number of ventures including Capitol Health and 3D Medical. They proposed that Simpson’s company provide 3D printing services to 3D Medical through a new company 3D Group, Ltd. The new company would also commercialize Simpson’s designs.
This was not to be. And eventually 3D Group went into administration and 333D Pty Ltd acquired its assets, including the intellectual property of Simpson.
In January 2016 Australian Broadcasting Corp’s Josie Taylor reported that the Australian Securities and Investment Commission (ASIC) was, “investigating the administration of 3D Group, and that ASIC has appointed a team to examine the business and how it was administered”
Globally, the Australian Securities Exchange (ASX) is one of the largest stock exchanges worldwide, and like other exchanges a listing adds prestige to an enterprise.
As financial journalist Mike King reportedCapitol Health used the credibility afforded by an ASX listing to embark on a debt financed spending spree。In his role as managing director at Capitol Health Conidi was awarded 15 million share options by the company in February as debts approached US$76 million. The company currently trades at US$0.11 and has suspended dividends.
Revenue Prospects Questioned
The quoted market capitalization figure of US$11 million (AUD$14 million) does seem rather high for a 3D printing reseller. Commentators have suggested that the value of the company is bolstered by an exclusive license to make sporting merchandise for Australian Football League.
In September 2015 333Dmanaging director Frank Pertile told AAP, “We haven’t nailed anything down at the moment but it’s just a question of sitting down with the AFL and marketing to develop a roll-out program for the next 12 months and see what we can come up with.”
With former AFL CEO Andrew Demetriou as a shareholder in 333D, it might seem the company has an inside track to securing this deal and accessing what might be a lucrative market. Demetriou is also chairman of Capitol Health.
However, almost one year later the AFL does not stock 3D printed merchandise in its stores. When the company who run AFL stores were contacted for comment by 3DPI about the planned 3D printed replica trophies and images of players, Peter Townsend of Infinite Retail replied, “We have no information on that issue.”
Company Threatened with Suspension
Frank Pertile was also a non-executive director of 3D Medical Limited. The auditor of 3D Medical Ltd, Bentleys Audit & Corporate, resigned in October 2015, 10 months after the company listed on the ASX. In this case the company raised $4 million via the ASX listing, again through a reverse takeover this time using Safety Medical Products Limited.
In the 3D Medical Limited prospectus, company activities are described as focused on, “twin technology platforms of 3D printing and holographic projection.”
3D Medical Chairman Nigel Finch announced the company had received an order for 25 3D printed titanium jaw units, but would disclose neither the value of the contract or the name of the client. The last news to be published on the company’s website was dated March 17, 2016.
In April 2016 it was announced that Burlington based U.S. company Mach7 Technologies had acquired 3D Medical as a wholly owned subsidiary. The deal wasvalued at $60 million。The merged enterprise trades on the ASX as M7T with a current share price is around US$0.03, giving a market cap of US$14.5 million.
Prior to the merger the ASX warned 3D Medical Limited that the company might be suspended from trading on the exchange. In a letter dated 18thJanuary, 2016 the ASX queried the sequence of events around the announcement, “Mach7 awarded US Patent for mobile device image capture” on 13 January 2016 by 3D Medical Limited and the purchase of 130,000 shares in the company by Nigel Finch several weeks earlier.
3D Medical Limited responded on the 20thJanuary 2016 writing that the company, “does not consider that the information in the Announcement constitutes information that a reasonable person would expect to have a material effect on the price or value of 3DM’s securities.” Furthermore the company defended itself claiming the announcement did not relate to 3D Medical and the ASX were incorrect in dating the patent announcement to 29thDecember 2015, when the date was 7thJanuary 2016.
Mach7尚未回复外墙的请求ts about the legacy sales made by 3D Medical, the timing of announcements made relating to patents or the value of the $60 million investment.
Questions for 333D
Given the history surrounding 333D and the business dealings of John Conidi and Frank Pertile, we approached the company for comment earlier this week. However, as of publication date 333D had not responded.
The 3D printing industry has seen its fair share of over exuberance by investors. At one time the mere mention of 3D printing was sufficient to send a companies stock soaring, as in the case of Camtek Ltd.
Furthermore, thedangers of investing in “penny-stocks”are well documented, both by 3DPI and in the film version of Jordan Belfort’s time asThe Wolf of Wall Street.Interestingly Belfort has run a series of entrepreneurship seminars in Australia.
For investors in any venture, important questions must be asked. Paramount is how an enterprise plans to generate revenue.
According to unaudited financial statements filed with the ASX the company has US$3.65 million (AUD$4.8 million) in accumulated losses, this includes the losses accumulated while trading as Oz Brewing Limited.
The most recent financial statements for 333D Pty Ltd. for the six months ended 31 December 2015, show US$61k (AUD$81k) revenue and a loss of US$177k (AUD$233k). The loss is attributable in part to sizeable consulting fees.
These financial statements were not audited and as such there is no requirement to disclose the nature of payments made to related parties.
However the accounting firm who reviewed the accounts, RSM, draw attention to the size of the loss and liabilities of the company. These matters, “indicate the existence of a material uncertainty which may cast significant doubt about the company’s ability to continue as a going concern。”
