5BARz International Inc. (fka BARZ)

[As I See It]

My assessment of the 2nd quarter 10Q is the following:

The balance sheet is ugly. Nothing really new here.

The convertible note litigation is very ugly, though a lot more of it has been settled. The cost to settle has been the issuance of a significant number of new shares. Unfortunate,but not much new here either.

The revenues that were booked were very small. It is impossible at this point to get a read on margins until large scale manufacturing commences. Remember this was for the qtr. ending in June.

NOW FOR THE GOOD NEWS.
Look at the terms for this loan that is currently under a memorandum of understanding. 4% or 6 mo. libor + 2% are terms that are extended only to companies with very solid profitable business potential. This is a far cry from the toxic debt that 5BARz was forced to accept prior to receiving substantial orders from Vodafone and Bharti AirTel. It is probably a working capital bridge loan to finance the beginning of large scale manufacturing. This a significant indicator of the future of this company.

On September 22, 2016, 5BARz International, Inc., 5BARz Pte Ltd. in Singapore and Daniel Bland, collectively referred to as the 5BARz Group, entered into a memorandum of understanding agreement with RRM Resources Pte. Ltd. in Singapore, whereby RRM Resources agreed to lend to the 5BARz Group, $3.5 million USD for working capital requirements in Singapore and India. The 5BARz Group have paid margin monies to be applied against loan principal in the amount of $250,000 USD on September 21, 2016 with a commitment to pay a further amount of $110,000 USD, 5 days from release of the initial $1.5 million loan from RRM Resources. The loan is to be funded in two parts, the initial traunche of $1.5 million is to be funded within 12 days of the payment of the first tranche of the margin money, and the second tranche of $2.0 million to be funded, with 25 days of payment of the initial margin monies. The loan term is 11 months from receipt of the first $1.5 million, with an interest rate the greater of 4% on the outstanding principal, or 6 month LIBOR +2%. The loan was not yet funded by October 20, 2016.

The following new business that is already booked should be able to easily solve 5BARz current weak financial condition and make this a wildly profitable company to justify the favorable loan terms above. The technology looks to be transformative.

During the recent quarter, the Company has manufactured and delivered product based upon initial purchase orders received from two of the largest cellular network operators in India for units that are specifically channelized for operation on each operator’s network. The Company has received very positive feedback on the operation of these units in India. Testing has indicated data rate improvements up to 100%, elimination of dropped calls and an elimination of buffering for audio/video reception. Based upon these deliveries, in addition to several other purchase orders in increasing quantities, one cellular network operator has issued a “Network Hardware and Software Ordering Document”, commencing June 1, 2016, and effective for two years, which provides the parameters for orders to be shipped to that operator, during that period.

The Companies involvement with these cellular network operators, and the 5BARz proven capability in the industry have resulted in the expansion of opportunities for the Company. The Company delivered a “Fuji WIFI Broadband Router” in response to an opportunity to participate in the rapid expansion of broadband to the home throughout India, As a result on August 25, 2016 the Company entered into a Strategic Alliance Agreement with a Tier 1 cellular network operator in the region, along with a major broadband operator in the region to provide a minimum of 5 Million of the 5BARz broadband routers to clients of the Company’s strategic partners....... The Strategic alliance also contemplates the delivery of other products and accessories, which may include connected sensors, connected home automation devices, connected cameras, headsets, VoIP phones etc.

More good stuff.The loan mentioned above will allow 5BARz to begin larger scale manufacturing immediately while the Axis Capital financing is completed.

The Company’s subsidiary 5BARz India Private Limited is working closely with Axis Capital in India, an investment bank that placed approximately $10.5 Billion USD in investment in the region since January 2015. Axis Capital in India is focused upon the financing of the Company through the sale of up to 20% of the equity securities of the subsidiary operations in India. This investment banking relationship has developed substantially as a result of the acceleration of opportunities for the Company in India. However, there is no assurance that this financing arrangement will be accomplished.

Product Commercialization – The Company became an approved vendor and received several purchase orders for Cellular Network Extenders from two Tier 1 cellular network operators in India. The magnitude of these orders are expanding rapidly in the current year.

Management expects the earnings from this new product and strategic alliance will represent a significant contribution to working capital and profitability for the Company.

There may be a little more short term pain. Some of the former toxic debt holders that received shares may bail, but in my opinion the technology is solid, substantial orders have been received, there is real depth of management, and the financial crunch looks like it will be solved very soon. Good luck to all shareholders.