Is Finjan (FNJN), which announced on June 4th, that it successfully reverse merged with Converted Organics (COIND), the next big monetization play we discover ahead of the Wall Street crowd?
Only time will tell. But taking a quick look at who is running the newly merged company, a quick glance at the history of Finjan which was founded in 1997, a peek at who some of the largest outside shareholders are, an understanding of how tightly the float is held, plus $125 million in licensing revenues, $29 million in cash and a number of other things (listed below), leaves us to believe we may very well be onto our fourth big "off-Wall Street" discovery.
Our most recent find Finjan, follows closely on the heels of our discovery of VirnetX
(VHC) at $6 per share in the summer of 2010 which later traded near $42, Vringo
(VRNG) at $2.10 in the summer of 2011 which later traded near $6, and most recently CopyTele
(COPY) in the spring of 2013 at $0.20 which later traded as high as $0.35 and which has been one of the best performing patent monetization company since we began coverage of a basket of twelve select category leaders.
Let's take a look what has our antennae quivering in anticipation.
Daniel Chinn, CEO of Finjan, Inc. and former Partner of Israel Seed Partners. Mr. Chinn is the CEO of Finjan, Inc. and is a member of Board of Directors of Finjan Holdings, Inc. In 2011 Mr. Chinn was appointed Chief Executive Officer of Finjan. Inc. Mr. Chinn is a Partner of Tulchinsky Stern Marciano Cohen Levitski & Co., an Israeli law firm, where he specializes in corporate and transactional matters. Prior to joining Finjan Inc., Mr. Chinn was the Chief Executive Officer of Seambiotic Ltd. Seambiotic Ltd. develops and produces marine microalgae for the food additives sector and as an energy alternative source. From 2006 to 2010, Chinn was a Partner at Israel Seed IV, L.P., an investment company focusing on Israeli information technology and life sciences companies. Mr. Chinn brings to the Board of Directors a deep knowledge and understanding of Finjan’s business, gained over seven years of service as an executive officer and director of Finjan.
Phil Hartstein, President. Mr. Hartstein will oversee the direction and management of current assets and future investments. Mr. Hartstein has served in a number of senior roles throughout his career. Previously, Mr. Hartstein was vice president and portfolio manager with IP Navigation Group (IPNav), a firm representing Fortune 500 clients, universities, private equity investors, and smaller – sometimes individual inventor – companies in their licensing and enforcement activities. He was managing director with Rembrandt IP, a private equity investment fund, with a client-facing role focused on originating new investment opportunities, constructing strategic and tactical plans enforcement plans, and working to maximizing financial returns for those investments.
In previous roles, Mr. Hartstein was a director with IPotential in the patent brokerage group, having completed dozens of transactions with estimated transaction values of more than $100 million. He was also a director and early member of Ocean Tomo’s management team overseeing both the patent analytics and IP acquisitions groups. Prior to that, he spent several years working for a medical device start-up managing the preparation, prosecution, and licensing for the company. He began his career at Knobbe Martens Olson & Bear as a patent engineer, where he prosecuted client patents and worked on patent portfolio optimization strategies across several high-tech sectors.
Shimon Steinmetz, CFO. Mr. Steinmetz joined the Company in 2013. Prior to Finjan Shimon worked in the technology investment banking practice at Cantor Fitzgerald. Earlier in his a career he worked as restructuring consultant at Grant Thornton and as a senior associate at TH Lee Putnam Ventures.Shimon began his career on Wall Street as an investment banker at Salomon Smith Barney. Shimon holds a MBA from the University of Chicago Booth School of Business and a BA from Yeshiva University.
Shlomo Touboul, Senior Advisor. Mr. Touboul founded Finjan Software in 1997 and is named as an inventor on a number of Finjan patents covering behavior-based technologies for identifying and deflecting malicious code from accessing endpoint devices across networks and the internet. Mr. Touboul is recognized internationally as a thought leader in the cyber security space as he has both founded and advised a number of companies in the sector. His current involvement includes CUPP Computing, Yoggie Security Systems, StategySeeker.com, and Finjan where he continues to advise the company about software security market segments.
Joshua Weisbord, Director of Investor Relations. Mr. Weisbord has been with the company since October of 2012. Prior to coming on board, Weisbord worked for Oppenheimer and Company for six years in their New York office, where he started in Sales and Trading and rose to a position in the Private Client Division. He holds a Bachelor’s Degree from the University of Michigan. A Philadelphia native, Weisbord has long been involved in the Thoroughbred racing and breeding industry along with his twin brother Bradley.
Michael Eisenberg, Partner in Benchmark Capital: Michael Eisenberg joined Benchmark Capital as a general partner in July 2005 from Israel Seed Partners where he was a general partner since July 1997. Eisenberg began his career at Jerusalem Global where he started and led the firm’s successful investment banking group and partnership with Montgomery Securities. Michael has focused on Internet investments since 1995 and has invested in and sat on the board of Israel’s leading companies and start ups, such as Shopping.com (Nasdaq SHOP, acquired by EBAY), Conduit, SeekingAlpha, Gigya, Tunewiki, Wix, Answers.com (Nasdaq ANSW), Tradeum (acquired: VERT), and Picturevison (acquired: EK).
Alex Rogers, Partner at Harbourvest: Alex Rogers began his career in 1998 at HarbourVest where he is currently the Managing Director. He focuses on direct co-investments in growth equity, buyout, and mezzanine transactions in Asia, Europe, and emerging markets regions. Alex completed HarbourVest’s associate program in 2000 and went on to Harvard Business School. After receiving his MBA in 2002, he joined HarbourVest’s London-based subsidiary and has been instrumental in expanding and managing the direct investment team in London, including the Firm’s direct European senior debt investing activities. He has also been actively involved in the Firm’s business development activities, including the listings of HarbourVest Global Private Equity Limited (“HVPE”) and HarbourVest Senior Loans Europe Limited (“HSLE”). Alex transferred to our Hong Kong subsidiary in 2012. He serves or has recently served as a board member or board observer at M86 Security, MobileAccess Networks (acquired by Corning), MYOB (acquired by Bain Capital), Nero AG, Transmode Systems (TRMO:SS), TynTec, and World-Check (acquired by Thomson Reuters).
Eric Benhamou, Chairman of Benhamou Global Ventures: Mr. Benhamou is a director of the Company and has served in a similar capacity as director of Finjan since 2006. Mr. Benhamou is also Chairman and CEO of Benhamou Global Ventures, LLC, which he founded in 2003. Benhamou Global Ventures, LLC invests and plays an active role in innovative high tech firms throughout the world. Mr. Benhamou sits or has sat on the boards of directors of numerous public and private companies in the technology industry. Among U.S. public companies, he serves as a director of Cypress Semiconductor Corporation, a semiconductor company (Chairman, since 1993) and SVB Financial Group, a diversified financial services company, bank holding company and financial holding company (since 2005), and has previously served as a director of RealNetworks, Inc., creator of digital media services and software (2003-2012), 3Com Corporation, a public networking solutions provider (Chairman, 1990-2010), Voltaire Ltd., a public grid computing network solutions company (2007-2011), Dasient, a security company that provides malware detection and prevention solutions (2010-2011) and Palm, Inc., a public mobile products provider (Chairman, 1999-2007).
Edward Gildea, former Chairman and CEO of Converted Organics. Edward J. Gildea has been Chairman, President and Chief Executive Officer of Converted Organics Inc. since January 2006. From 2001 to 2005, he held several executive positions including Chief Operating Officer, Executive Vice President, Strategy and Business Development, and General Counsel of Quality Metric Incorporated, a private health status measurement business. During that period, Mr. Gildea was also engaged in the private practice of law representing business clients and held management positions in predecessor companies. Mr. Gildea is also a member of the Board of Directors of WPCS International Incorporated (Specialty construction and wireless communications).
History (from their website):
Finjan, founded in 1997, is recognized as a pioneer in the endpoint, web, and network security industries. Their early technology innovations and products helped define the state-of-the-art for detecting and deflecting software intrusions and malicious code delivery, over internet and private networks, to devices located at endpoint connections. Beginning with the formation of the company, they have invested considerable time, effort and resources to secure their inventions with US and Foreign patents. As Finjan’s patented technologies have become increasingly relevant across today’s growing security sector, they continue to seek licenses to their patents across the industry.
Finjan has successfully licensed its patents to a number of industry players, demonstrated a strong commitment to pursuing unlicensed companies through litigation, resulting in more than $125 million in licensing revenues, to date. The company continues to invest in the security sector and intends to broaden its technology and intellectual property holdings through continued acquisition, investment, and strategic partnerships.
On June 4th Converted Organics (COIN) announced the successful completion of a merger transaction with Finjan, Inc., in which the COIN acquired Finjan and that the name of the Company had been changed to Finjan Holdings, Inc. The acquisition of Finjan, comprising numerous patents and other intellectual property dating back to 1996 and expiration dates extending through 2030, positions the Company to pursue additional licensing and enforcement programs in the security industry.
In a press release he company revealed, "This transaction to become a public company is the starting point of our creating a platform for future investments and acquisitions related to the cyber security space," said Phil Hartstein, the Company's newly designated President. "We are pleased to have the continued support and backing of our original institutional and corporate investors as we transition to the next stage of our company's development." The noted the Newco is approximately 91.5% owned by former Finjan stockholders.
They additionally stated, "In November 2009, Finjan's operating business was acquired by M86 Security, Inc., subsequently acquired by Trustwave Holdings, Inc., both of which continue to sell and support Finjan productsand customer installations. As part of this transaction, Finjan retained complete ownership over its intellectual property portfolio, granting a license to M86, and subsequently a license to Trustwave. Today, Finjan's intellectual property portfolio consists of over 20 issued U.S. and seven international patents, multiple pending U.S. and international applications, all of which are in and around the security space. Daniel Chinn, CEO of Finjan and a newly appointed member of the Company's Board of Directors, added "This transaction allows us to rebuild our company, reassume our role as thought leaders in the cyber security market and give us access to the capital markets which will be important for our future growth plans."
They additionally, additionally stated. "As part of this transaction, the Company entered into a Lock-Up agreement with all significant former Finjan, Inc. stockholders, representing approximately 90% of the total capitalization ofFinjan Holdings, Inc. Details of the Lock-Up agreement accompany the Company's Current Report on Form 8-K also filed with the SEC on June 3rd, 2013. The Current Report on Form 8-K contains detailed information relating to the Merger and the other transactions effected in connection with the Merger. One is advised to carefully review the Current Report on Form 8-K.
On June 10th they announced it has been notified by FINRA that because of administrative delays for purposes of implementing the new common stockticker symbol, the date of its previously announced trading symbol change has been moved. Commencing Tuesday, July 2, 2013, the Company's common shares are scheduled to start trading on the OTC markets under the trading symbol "FNJN" (OTC MKT: FNJN). Yesterday, on July 1st, they announced that effective Tuesday, July 2, 2013, the Company's common shares are scheduled to start trading on the OTC markets under the trading symbol "FNJN" (OTC MKT: FNJN). The previous trading symbol was "COIND".
Until the SEC filing service databases are seeded with the new symbol, it maybe difficult to accurately follow filings included in the 13D's and 14F's, but as of 3AM on Tuesday morning:
On June 3, 2013, in connection with the Reverse Merger, we entered into a registration rights agreement (the “Registration Rights Agreement”) with former stockholders of Finjan who hold, in the aggregate, 237,203,659 (or approximately 96.6%) of the shares of our common stock issued in the Reverse Merger, as well as Hudson Bay and Iroquois.
Iroquois and Hudson Bay 14F "Pursuant to the Exchange Agreement, immediately following the effectiveness of the Reverse Merger, Hudson Bay and Iroquois exchanged an aggregate of $1,192,500 principal amount of our convertible notes, 13,281 shares of our 1% Series A Convertible Preferred Stock (“Series A Preferred Stock”) and warrants to purchase an aggregate of 633,327,047 shares of our common stock for an aggregate of 21,473,628 shares of our common stock, or 8% of our outstanding common stock immediately following the Reverse Merger on a fully-diluted basis immediately following the Effective Time (but excluding any shares underlying options to purchase Finjan common stock which were converted into options to purchase our common stock). Each of Hudson Bay and Iroquois also released us, our affiliates, subsidiaries and related companies from any and all debts, liabilities and other claims such party has, had or may claim to have against us, except for those related to any breach of the Exchange Agreement, the Registration Rights Agreement (as defined below) or the Closing Agreement (as defined below, see link).
(Iroquois also has invested in VirnetX Holding Corp., Vringo Inc. and Spherix Inc (SPEX). Hudson Bay has invested in VirnetX, Vringo, Spherix and Marathon Patent Group Inc (MARA))
Michael Eisenberg 64,242,658 shares.
Cisco Systems 20,261,146 shares.
Harbourvest 51,641,241 shares
LIQUIDITY AND CAPITAL RESOURCES:
(Again, we caution it may be difficult to find these filings with the symbol change from COIND to FNJN for a short period of time.)
Finjan had approximately $91.5 million dollars of cash and cash equivalents, and $28.9 million of working capital as of December 31, 2012. On a pro forma basis, our cash and cash equivalents as of December 31, 2012 totaled approximately $91.7 million and our working capital was approximately $29.2 million. See “Unaudited Pro Forma Financial Information.” As of December 31, 2012, Finjan’s current liabilities included approximately $33.9 million due to FSI, Finjan’s then-parent company, which was repaid in full in February 2013 in anticipation of Finjan’s reorganization.
As of March 31, 2013, Finjan had approximately $29.3 million dollars of cash and cash equivalents, and $28.8 million of working capital. The decrease in cash on hand as of March 31, 2013 as compared to cash on hand as of December 31, 2012 was primarily due to the repayment of intercompany indebtedness to FSI in connection with Finjan's reorganization. On a pro forma basis, our cash and cash equivalents as of March 31, 2013 totaled approximately $29.8 million and our working capital was approximately $29.0 million. See “Unaudited Pro Forma Financial Information.”
Cash flows from operating activities.
Finjan’s net cash provided by operating activities increased by $40.9 million, or 153.8%, to $67.5 million during the year ended December 31, 2012 as compared to the year ended December 31, 2011. Such increase is primarily attributable to Finjan’s receipt of approximately $80.6 million of cash proceeds, net of legal costs, as a result of two settlements entered into during 2012. The receipt of such proceeds resulted in a substantial increase in Finjan’s cash flows from operating activities for the year ended December 31, 2012 as compared to the prior year.
We intend to use the net proceeds received to finance post-trial proceedings and, if necessary, appeals with respect to the 2010 Litigation, any future licensing and enforcement activities and any future acquisitions, as well as for working capital and general corporate purposes. Finjan’s net cash provided by operating activities was flat on a year over year basis for the period ending March 13, 2013 as we did not enter into any new license agreement or settlements in the first quarter.
Finjan has successfully licensed its patents to a number of industry players, demonstrated a strong commitment to pursuing unlicensed companies through litigation, resulting in more than $125 million in licensing revenues, to date (though we're not sure when "that date" began).
The following was reported in The Deal:
Oddly enough, we added Converted Organics
to our "trading" watch list at $0.01 the same day we added Vringo, which could be $5.00 per share after an ensuing reverse (500:1 we beleive), but we lost track.
So what have we left out? Well we have a top ranked management team, we have some very powerful and well connected VC's on the board and as shareholders, we have Hudson and Iroquois as 8% holders, we have a tiny float, we have plenty of cash, though management has stated, "Our cash requirements are, and will continue to be, dependent upon a variety of factors," and "We expect to continue to devote significant capital resources to the 2010 Litigation and any other licensing and enforcement actions we pursue."
We also have new symbol exactly one day old, and in a world that doesn't particularly enjoy reading 8K's and 13D's we just may have come across something that a lot of investors don't even know exists -- even with the $85 million they collected last year, which makes the current $280 million market valuation one whole heck of a lot easier to swallow.
So with 20 plus patents in a very attractive industry, computer and internet security and a claim of being "...one of the first companies to develop and patent technology and software that is capable of detecting previously unknown and emerging threats on a real-time, behavior-based basis, in contrast to signature-based methods of intercepting only known threats.."
All in all we think we have an excellent speculation and a first mover advantage, assuming this gets posted before the market opens.
Adding Converted Organics