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Umbra Applied Technologies Group Inc (OTCMKTS:UATG) Looks Like It's Gearing Up For NASDAQ

Umbra Applied Technologies Group Inc (OTCMKTS:UATG) Looks Like It's Gearing Up For NASDAQ
Written by
Chris Sandburg
Published on
July 25, 2016
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Alex Umbra, Chairman and CEO of Umbra Applied Technologies Group Inc (OTCMKTS:UATG), just sent a letter out to the company's shareholders detailing operations and updating progress. The letter seems to hint at a few major upside catalysts near term, and could be a nice entry point ahead of the developments. Here's what to look out for.First, a quick introduction to the company. UAT is a tech company that designs, develops and sells a wide array of products for use in the protection, military and defense spaces. A lot of what UAT develops is shrouded in secrecy – the company just fitted out an office protected by the same measures that cover US Fed laws enforcement agencies.So what does the letter say about what to look out for going forward? Well, Umbra just picked up more than $20 million worth of assets and has essentially completely restructured the company:

"Over the past 34 months, senior management has been extremely active, investing more than hundred thousand man hours and $5 Million Dollars and to capitalize, structure and build our company from the ground up. We have purchased technology and more than five companies totaling $23 million dollars in acquisition costs without increasing our debt."

Its new office is set to be complete and operational at some point during August, and a raft of new hires and employment based incentive/performance policies are in place. To us, this sounds very much like preparations for an up listing application.The desire to avoid increasing debt, the corporate restructure, the filling out of the workforce, and the general expansive tone of the communication suggests Umbra intends to apply for a NASDAQ or NYSE listing, and this could quickly translate to an upside revaluation.Defense and protection are hot topics right now in the US, and only look as if they are going to heat up as domestic and civil unrest, terrorism and the like take (and keep) center stage ahead of the election in the US. There's not been a better time to take a stab at attracting institutional capital, and if Umbra can get its listing, it can position itself to do just that.So what's the downside?Well, the company has managed to avoid piling on debt with its recent acquisitions, and its debt load is pretty low as of March 31 – circa $50K – but it's losing money annually and quarterly, and cash on hand is just $8K. There's going to need to be some level of financing going forward, and this will almost certainly come in the form of a dilutive issue. The degree of dilution isn’t clear right now, but it could be pretty damaging from a per share value perspective.Revenues and income data looks a bit all over the place at the moment, and so interpretation isn’t that useful. We're looking to some information injections to offer up a bit of clarity. Right now the company's OTC status makes it tough to take a proper look at its capital structure, but if (when) it applies to one of the major exchanges, we will get an audited prospectus and – by proxy – some clarity on the company's financial status.The listing aside, we're also on alert for some product updates, the likes of which could serve up some upside momentum. Here's what Umbra said in the recent communication:

"We expect to achieve some very significant milestones over the next several months"

As to when these milestones complete, we expect speculative capital to flow into the company and – in turn – boost its market capitalization.The bottom line is this: if Umbra can avoid too heavy a degree of dilution as it prepares for/executes on its up listing, there's some real potential for upside in the stock. The risk right now is capital-related, and quite high, but as a speculative growth exposure, it might be worth a shot.For updates on UATG, subscribe to our newsletter below!Disclosure: We have no position in UATG and have not been compensated for this article.

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