Social Detention, Inc. (OTC Pink: SODE) Company Report
- This report offers an analysis of Social Detention, Inc. (OTC Pink: SODE)
- Social Detention is an infrastructure contracting company, which has a long history of winning large government contracts ranging from $1-5 million.
- Social Detention primarily operates in state of California, where company has had numerous major contracts involving San Quentin State Prison, Long Beach Courthouse, Mt. Diablo Unified School District, and many more.
- Social Detention reported record first quarter 2018 revenues of $400,000, forecasts very strong second quarter
- Well-positioned to benefit under any major infrastructure overhaul, as laid out by President Trump in the campaign and early in his presidency.
- Company could also benefit from measures to improve school security, CAL TRANS’s $7 billion annual budget, the $3 billion BART measure, and the $9 billion CDCR budget and bond measures for infrastructure upgrades
- Recently acquired social media correctional website company, socialdetention.com, plans to create marketplace
- Recently announced strategic partnership with CA government contractor, DME, Inc., which will open access to other forms of government contracts and feature a 50/50 profit sharing plan
- Social Detention backlog at all time high and finding bid market is highest profit margin levels seen in 28-year history
- ELLA is Social Detention’s cannabis infrastructure project subsidiary
- Company also entered into cannabis industry earlier this year with two contracts to construct cultivation facilities located in Nevada County, California
Social Detention, Inc. (OTC Pink: SODE):
Introduction to Social Detention, Inc.
Social Detention, Inc. is an Alamo, CA-based company that focuses on government contracting for vital public infrastructure projects. The company primarily operates in the state of California, where it has a long history of securing contracts ranging from $1-5 million. Mr. Robert Legg is the President and CEO of Social Detention, Inc., who also has 28 years of experience within government contracting.
Social Detention, Inc. is listed on the OTC Pink Sheets and is current with OTC Markets. As of May 2018, Social Detention, Inc. has a market cap of $24.89 million. Furthermore, the government contracting company maintains a share structure consisting of 200 million shares authorized and 183.75 million shares outstanding, as of November 2017.
Through the early start to 2018, Social Detention has seen a high of around $0.16 and a low of around $0.03. The stock currently trades at $0.14, as of this publication. Like other infrastructure stocks, Social Detention continues to wait on further information regarding President Trump’s proposed $1.5 trillion national infrastructure overhaul. Unfortunately, the plans have seemed to temporarily stall, as North Korea, Iranian Nuclear Deal, Russia investigation, and other issues take precedent.
However, given the current state of the United States’ crumbling infrastructure, Washington D.C. may not be able to ignore issue for much longer. While both political parties support an infrastructure overhaul, they both have very different ideas and methods at which to execute the plan.
Exhibit One – 2017 U.S. Infrastructure Scores Report
According to InfrastructureReportCard.org, the United States received a pitiful overall infrastructure score of “D+.” Diving deeper into the report, the infrastructure watch dog gave U.S. transit the overall worst grade with a “D-.” On the plus side, U.S. rail infrastructure was the highest rated with a “B” grade
Source: InfrastructureReportCard.Org 1
Turning to a Bloomberg Intelligence report on U.S. infrastructure outlook, analysts once again highlight transportation as the weakest and in greatest need of improvement. Analysts estimate that U.S. government spending on transportation infrastructure along could be as much as $306 billion annually within the next ten years. In 2016, transportation infrastructure spending came in at $245 billion. The Bloomberg Intelligence report also highlights the need for improving renewable energy infrastructure, which needs spending of around $201 billion through 2025. Analysts estimate that this represents 135 gigawatts of wind and solar energy capacity.
Unfortunately, the estimates still fall far short of the American Society of Civil Engineers’ report claiming the need for an estimated $454 billion in annual spending in order to truly fix our ailing infrastructure. Analysts are also concerned that President Trump’s trade policies could hinder infrastructural improves, as costs could rise from a trade war that involves infrastructure materials.
Exhibit Two – Transportation Spending Forecast
Source: Bloomberg Intelligence 1
Social Detention, Inc. is well-positioned to benefit from the needed infrastructure overhaul. The company is consistently land new government contracts on a regular basis, as management’s vast expertise in the field continues to pay off. Aside from its lucrative government contracting business, the company announced at the beginning of the year that it has entered the cannabis infrastructure business. As cannabis legalization continues to take hold and grow across the country, Social Detention’s cannabis construction business is a welcomed diversification into another high-growth market. After a posting record revenue during the first quarter of 2018, management sees second quarter sales coming in between $1.3-1.5 million, based on the current backlog, outstanding & pending proposals.
US Infrastructure – A Background
Infrastructure consists of the “basic physical and organizational structures and facilities needed for the operation of a society or enterprise.” This includes roads, utilities, buildings, bridges, airports, rail, and more.
These structures and aspects of our society are often taken for granted, yet activity would come to a screeching halt if we did not have vital infrastructure. Investing in quality infrastructure upgrades is a necessary part of any thriving society.
However, the United States government largely continues to ignore the current state of our nation’s infrastructure. While infrastructure reform is an issue that both political parties support in principle, they differ widely on how the reforms should take place.
In February 2018, President Donald Trump released his $1.5 trillion infrastructure reform plans. The plan calls for $200 billion in direct federal funding, while local, state, and private investors are expected to fill in the remaining gap. In addition, the Trump infrastructure plan calls for massive deregulation to the permit application and review process.
A month later, Senate Democrats unveiled a counter $1 trillion infrastructure overhaul plan. Under their plan, around $140 billion would be allocated to road and bridge repairs, $115 billion set aside for water and sewage updates, $50 billion for schools, and $40 billion for airport renovations. It is important to note that the Senate Democrats’ infrastructure plan would also call for the rolling back of Trump Tax Cuts and reverting back to the old tax code.
However, it seems infrastructure plans have been set aside as numerous other political issues and scandals have gotten in the way. This does not change the fact that vital American infrastructure continues to decay and is in desperate need of repairs.
Exhibit Three – 2017 Infrastructure Grades By Section
Source: InfrastructureReportCard.org 2
The most recent Infrastructure report card from the American Society of Civil Engineers’ (ASCE) from 2017 gave the United States a “D+” grade, which remained unchanged from their last report in 2013. In the four years separating the two reports, the ASCE found aspects of infrastructure had improved, while others continued to decay or remain the same.
There were seven specific areas that saw improvement from 2013 to 2017: hazardous waste, inland waterways, levees, wastewater, schools, rail, and ports. On the other hand, there were three notable downgrades: transportation, solid waste, and parks & recreation. The remaining infrastructure groups retained their mediocre-to-poor ratings.The report further highlights the dire need to upgrade US infrastructure across the board. However, our transit infrastructure needs to be a primary focus, as it is at risk of receiving a failing score in the near future. Overall, politics need to be set aside in order to prevent the United States’ vital infrastructure from completely failing.
Social Detention: Government Contracting Business
The driving force behind Social Detention, Inc. is its government infrastructure contracting business. Social Detention’s long history is filled with high-profile projects across California. Among some of key projects Social Detention has been a part of include:
- San Quentin State Prison
- Judge Herrera Courthouse
- Esparanza Pipe Replacement
- Contra Costa Water District Main Replacement
- Cal Trans Alameda
- Cal Trans Concord Rapid Setting Concrete
- Mohave County Jail
- Long Beach Courthouse
- Happy Valley Elementary Covered Walkway
- El Dorado Juvenile Hall
- Merced Juvenile Hall
- City of Pleasanton Yolanda Outfall Structure Repair
- CHP Mountain Pass Point of Entry – Ballistic Frame, Door and Activation Hardware
- Mt. Diablo Unified School District – Install Electric Signage & Related Work At Holbrook Elementary School
Recent major contract awards:
In February 2018, Social Detention announced that it had received a $1.2 million service contract from TADRC, Inc. Under the terms of the deal, Social Detention will provide “engineering, estimating, project management, and professional services.”
In May 2018, Social Detention announced that it has been awarded several contracts for building security and infrastructure repairs in California. The combined contract value comes in over $900,000 and effectively begins in the month of May.
Exhibit Four – SODE Contract Work
Source: Sodetention.com 1
Social Detention president and CEO, Robert Legg, said “The award of these projects demonstrates our ability to perform in all our divisions. As we venture through the second quarter 2018 we have built a platform to excel us to next level. Our backlog is at an all-time high and the bid market is at the highest profit margin level I have seen in my 28 year career. Negotiations continue on several acquisitions as well. We are in due diligence on three acquisitions that will be equity based without diluting our current authorized shares or cash position.”
The company’s most recent update announced a strategic partnership with DME, Inc., a California-based government contractor. The strategic partnership will allow Social Detention to participate and be active in proposals that it typically would not have access to outside of the partnership. The strategic partnership includes a 50/50 profit share from shared contracts.
Overall, Social Detention management estimates that the first twelve months under its strategic partnership could be around $2-5 million with profits around $600,000 to $1.5 million. In year two, revenues are estimated to come in between $5-10 million, with profits around $1.5-3 million.
Social Detention: Cannabis Infrastructure Projects
Another exciting growth area for Social Detention is the company’s cannabis infrastructure business. The entry into the cannabis infrastructure market came in November 2017, when Social Detention signed a joint venture agreement with Cann American Holdings.
The joint venture landed the first cannabis project just a month later in December 2017. The project was to build a commercial cannabis grow op facility in Hopland, California. The facility was the second on the client’s property and already in the process of growing 200 plants.
A second cannabis infrastructure contract was signed in early January 2018 by the joint venture. The second project featured building a grow op facility on five acres located in Nevada County, California. Once completed, the facility will be able to house 200 plants.
Social Detention’s ELLA subsidiary was responsible for “grading, trenching, footings, setting rebar, and erection of the steel hoop structure. Cann American will be responsible for irrigation systems and consultation on the grow and crop yields upon completion of the build.”
Status Of Social Detention, Inc.
Social Detention continues to be in a fantastic position to benefit from the much-needed US infrastructure overhaul. The company’s leadership has an extensive background in government contracting, which has shined through to Social Detention. The company is very well-respected and highly regarded within the California contracting market, as they have a long list of project success stories across the Bay Area to Southern California.
The company’s cannabis infrastructure business seems like a natural diversification for the company, which already has a stronghold in the largest cannabis market within the United States. Social Detention and its joint venture with Cann American Holdings have already completed two projects thus far into 2018.
As the infrastructure overhaul debate starts to come alive once again, Social Detention will be there ready to answer the call and benefit immensely. The company already posted record revenues during the first quarter 2018 and management estimates that the second quarter will be even better. Based on the recent developments, the estimates seem very reasonable.
The Balance Sheet and Income Statement
As of March 31, 2018, Social Detention reported the following current assets: cash of $168,953, and accounts receivable of $10,000. This gives the company total current assets of $178,953, as of the end of the period. Furthermore, the company reported other assets consisting of $28,300 in long term investments, which gives American Green total assets greater than $207,253.
Exhibit Five – SODE Balance Sheet Q1 2018
Source: OTCMarkets.com 1
Turning to liabilities, Social Detention reported note payable (related party) of $12,000 and notes payable of $28,300. This gives the company total current liabilities of $40,300, as of the end of the first quarter 2018.
In shareholders’ equity, Social Detention reported common stock of $183,753, additional paid-in capital of $220,847, consolidated account of ($369,647) and accumulated deficit of $132,000. This gives the company total shareholders’ deficit of $166,953. Total liabilities and shareholders’ deficit came in at $207,253, as of the end of March 2018.
Exhibit Six – SODE Cash Flow Statement Q1 2018
Source: OTCMarkets.com 2
Turning to the cash flow statement, Social Detention reported net income of $132,000. Accounts payable of ($7,875) and accounts receivable of $99,000 give the company changes in operating assets and liabilities of $91,125 and net cash used by operating activities of $223,125. The consolidated accounting of ($97,125) gives the company cash flows from financing activities of ($97,125). Social Detention ends with net increase in cash of $126,000, which combined with $42,953 in cash from beginning of period, gives the company cash holds of $168,953 at the end of the period.
Management Team and Board Members
Robert Legg – President, CEO
Mr. Legg has 20 years of Security and Infrastructure experience with a track record of taking companies from startup to multimillion dollar revenue producers and leveraging for high return on investment. His companies have been recognized nationally by Inc. Magazine and the San Francisco Business Journal Annually as one of the Years Fastest Growing Companies. His project experience is $1.5 Billion in cumulative value.
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