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Peerstream Chairman Invests Another $120k + Crypto Windfall + NASDAQ Uplisting

It is our understanding that Peerstream (OTC: PEER) is now (as of June 5) in full compliance with all criteria necessary for an uplisting to the NASDAQ. We will not be surprised to see the announcement of such a move any day now and will be very surprised if this does not occur over the next few weeks. We believe that Groove investors would do well to buy shares in advance of such a move, as we expect the stock to become significantly more liquid and to get much more positive attention from investors when this move has been completed.

We note that Peerstream chairmain of the Board Jason Katz is buying shares, as he filed a Form 4 on May 31st to disclose that he had invested another $120k into PEER shares, taking down 20,000 over the two prior days at prices that averaged about $6 per share. We believe an open market purchase of this size by one who already has over $3 million invested and who knows more than just about anyone else about the future direction of this company speaks volumes about the latent value here.

We also note that the company’s recent deal with ProximaX is already paying off in ways that we did not expect. We knew that the deal provided $5m in cash upfront with another $5-$7m to be realized as the company provides services over the next few quarters. And we thought the additional payment of tokens in the ProximaX ICO would be a six figure event. We were mistaken. As of the first day that the coins were listed on the Kryptono exchange they were changing hands at just over .03 per token, valuing Peerstream’s 216 million tokens at just under $7 million. The deal provides for more token payments of significance going forward in addition to the $5-$7m in additional cash.  Thus, the ProximaX deal has added over $12m in value to Peerstream’s balance sheet over the last few weeks even though the share price has not moved to reflect this 25% increase in the assets of the company and there is significantly more to come over the next few quarters.

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June 6, 2018 at 10:38 am Leave a comment

Remark Announces Kankan Rollout Underway

Remark (NASDAQ: MARK) announced yesterday that the company has commenced the roll-out of its Kan Kan Smart Eyes for Retail SAAS AI product. In the announcement it was mentioned that the company has secured agreements to install KanKan Smart Eyes in more than 10,000 stores in Shanghai and sees an addressable market of more than 500,000 retail stores in China and Southeast Asia. Per the release, these “easy to install” AI products give businesses “…greater insight s into their consumer’s behavior and into the businesses’ daily operations”. In addition to the 10,000 stores announced for Shanghai, the release mentioned that Remark’s Kankan was already working to install a more comprehensive data and AI solution in a deal that will see this product installed at 20,000 retail stores in China and Southeast Asia including food stores, supermarkets, convenience stores, super-brand malls and fast food restaurants.

We are pleased to see that the company’s AI products are gaining such traction as the company’s achievement of the 10,000 Shanghai store milestone for its lower end AI solution is an unexpected surprise, at least with regards to its timing. We fully expected the company to hit that number towards the end of the year and into 2019, but reaching that level by June 5 is a huge accomplishment. Not mentioned in the press release, but covered in a presentation at the LD Micro conference is that the company’s technology will eventually be able to offer those stores a solution that could convert their check out procedures to be similar to what Amazon (NASDAQ: AMZN) is testing in Seattle with its “Amazon Go” shops, where consumers merely pick up the items they want and leave with no waiting in line / check out procedure necessary due to the Smart Eyes camera system’s ability to bill the items to the customer’ account. We see the mention of this potential upgrade on the same day as the company announced it now has contracts for an additional 10,000 retail locations as a very bullish indicator of just one of the many ways this company is expecting to create additional value in the near future.

We were also pleased to see that the company filed a new shelf offering after the close, replacing its recently expired shelf. We see this as very bullish in that the company can still raise up to $7.2 million through its arrangement with Aspire and it could do so on essentially any weekday it so chooses. Thus, if the company wanted to raise capital quickly at a price within the current trading range, it could easily tap the Aspire deal. However, the filing of the shelf leads us to believe that the company may be considering a different direction – hopefully like another strategic deal similar to what we saw back in December when CP Group invested $10m at a $12 per share valuation when the stock was trading at $8 per share. If the company were able to complete another placement with a strategic partner at a price substantially higher than the current $5ish price, we believe that would push the stock to a much higher trading range. Plus we do not believe that our top shareholder and CEO (Shing) would allow any more MARK shares to be sold in the $5s. The rapidly growing Vegas.com is worth more than the current per share price of MARK in an acquisition scenario, as is the Sharecare stake and we think yesterday’s announcement suggests that Kankan is likely worth more than either Vegas.com and/or our Sharecare stake. We think Groove investors would do well to add shares here to hold for the long term and expect to see very significant price appreciation in Remark shares over the next few months.

June 6, 2018 at 3:09 am Leave a comment

PEER Reports Q1 2018 + ProximaX Deal

Peerstream (OTCBB: PEER and formerly known as Snap Interactive: STVI) reported Q1 revenues of $5.7mm, a decline of 3.5% from Q4 2017 and a 14.5% decline from Q1 2017. The revenue decline was due to a slowdown in the company’s legacy dating business and the decline outpaced the sequential growth achieved by Peerstream’s video streaming business. Despite the overall decrease in revenue, PEER posted its first EBITDA profit since the AVM merger was completed, reporting $105k in EBITDA. PEER was able to achieve positive EBITDA despite the double digit decline in revenue due to cost savings obtained through merger integration efforts.

We were pleased to see that the company was able to show sequential growth in its streaming business and that the company has been successful in achieving the merger synergies that have allowed for such a significant reduction in the company’s expense structure. More importantly, we are excited to learn of the post quarter-end developments related to the company’s Peerstream Protocol blockchain initiatives where the company’s recently executed ProximaX deal has already generated a payment of $5 million and will likely generated another $2.5-$5m over the next few quarters as various milestones are achieved. Thus, Peerstream this week received almost as much cash as the company earned in revenue in all of Q1 and there remains significant upside in additional revenue to be earned plus the value of a fairly significant stake in the coins of Proximax’s recent ICO, which raised over $30 million.

We believe Peerstream’s deal with ProximaX is a game changer that has been completely overlooked by investors. The deal’s $5 million initial payment raised PEER’s cash position as of today to $8.5 million, plus the deal provides another $2.5-$5 million in payments for achieving future milestones. We believe the ProximaX deal will provide a material boost to Peerstream’s revenue in Q2 and beyond. Perhaps even more importantly, we believe such a contract with a company like ProximaX will give Peerstream an enhanced resume for pursuing deals with other significant players in the emerging blockchain development space.

In summary, we believe that Peerstream’s reduced cost structure plus growth in the company’s core video streaming business will result in the company being cash flow positive for the remainder of 2018.  Additionally, we believe the rapidly emerging growth of the company’s blockchain initiatives could push PEER into its first profitable quarter in 2018.  And last but not least, we see significant latent value in the company’s patent portfolio and would not be surprised to see some developments that could add materially to the company’s cash balances and/or bottom line in the near future.  We believe Groove participants would do well to add PEER to their portfolio and note that the current $5 – $6 trading range does not come close to reflecting the financial impact or marketplace implications of the recent ProximaX or Kochava deals.  We see PEER as being very cheap at any price below $7 and expect that investors at today’s prices will enjoy significant double digit returns over the next few quarters.

May 9, 2018 at 3:06 pm Leave a comment

Update to Focus List

We are removing LMFA from our focus list due to management’s lack of communication with shareholders in the face of events and market action that competent management would address. The recent declines in LMFA’s stock price with no comment or action from management suggests that there may be negative information in the marketplace that has not been officially released by the company and it also suggests that management has little concern for its shareholders. Additionally, with the passing of the 10k filing deadline and no announcement of a shareholder conference call or any indication of an intent to update investors on recent events –  we are now convinced that we may see no departure from the company’s pattern of indifference towards its shareholders in the near future. These issues make it difficult to make a bullish case for LMFA going forward regardless of valuation.

April 3, 2018 at 6:32 pm 1 comment

Remark Holdings Update – Q4 Results Tomorrow Morning

With the largest short interest in Remark company history (3.54m as of Monday afternoon’s most recent NASDAQ report) outstanding, tomorrow’s full year earnings report and conference call should be interesting. Remark management has largely been muzzled over the last few weeks leading up to this report and we will get to hear from CEO Shing Tao for the first time since the company’s initial response to the ridiculous short seller report accused him of trying to steal Kankan while also claiming that Kankan and Remark’s other businesses are “not really there” (do not exist). While the content of that report was clearly ludicrous, the effect it had on Remark’s stock price was very real and the stock still trades in a range 25-30% below the range it traded prior to the short seller report despite very significant good news in the form of the company’s most significant AI deal to date with its CP Group contract to equip over 11,000 7-Eleven shops with Kankan technology.

We expect Kankan’s results and forward guidance to be the key driver of investor sentiment. Kankan is expected to produce approximately $2.7m in Q4 revenue, pushing the full year total to $6m. We are hoping for update on the Q1 revenue trend for Kankan and expect to see sequential growth over Q4 suggestive of a growth trend that will allow the company to achieve its $30m projected revenue run rate. We are also hoping that management will provide more color on the expected revenue implications of recent deals including the 7-Eleven partnership with CP Group.

Remark’s Vegas.com business is expected to show some impact from the tourism disruption following the mass shooting incident that occurred October 1. Management previously indicated an expectation of supplier cancellations in the wake of that tragic event and an impact in the $500k range below their previous estimates. We will be interested to see if Remark’s tourism business has been able to get back on track or if there is still some lagging impact. We believe the Q1 to date trend with the tourism business will be much more important than the Q4 figures with investors focusing on management’s outlook on the company’s ability to achieve its previous guidance of $325m in gross bookings generating $65-$75m in revenue. As for the company’s other businesses including Bikini.com, IRS.com and Fanstang, we do not believe that the revenue contribution is significant enough to move the needle and we are not sure that these will be discussed on the call.

We believe that Remark in the low $7 range represents a tremendous value for both long term investors and short term traders. We cannot fathom how short sellers will be able to exit their positions without significant losses given the enormity of the outstanding short position and what we expect to be an increasing realization by investors that Remark’s Kankan business alone may be worth more than $10 per share. We believe the ever increasing disconnect between the value of Kankan’s business and Remark’s stock price may ultimately lead management to take steps that will lead to a fuller realization of the value being created there.

March 28, 2018 at 3:31 pm 1 comment

LMFA Short Position at Record 52% of Float

After Friday’s close, LM Funding (NASDAQ: LMFA) filed an 8k announcing the departure of COO Dean Akers.  Given what the filings indicate should have been the “effecting” of the 2m+ share position to Esousa over the last couple of weeks, it appears that the “New York-based Family Office” is already starting to make their presence felt.  We believe this could be the first of many changes coming over the next few weeks and expect to get an update from the company very soon that may shed more light on the “technology-based” upgrade announced with LMFA’s debt exchange announcement last month.

Last week the NASDAQ released its short interest report showing that LM Funding  shares sold short are now at an all time company record 526,504 shares, a whopping 52% of the public float (LMFA Public Float is 1.01m shares). With the recent slowdown in daily average shares traded (for the full trading day on the report day volume was 115,101 shares), it would take more than a full week of trading with all trades being “buy to cover” transactions to zero out this short position. Of course, that would never occur because there are many beyond this community who watch LMFA for signs of life and when they see new buying emerge they will likely add to their position and more importantly, there are momentum traders who watch LMFA who would quickly pile in to take advantage of the tiny float vs. large short position that has clearly evolved over the last few weeks.

Checking with the various brokers this morning we see that there are essentially no shares available to short.  The Ameritrade/TOS/Scottrade platform has zero LMFA available for shorting, Fidelity has zero available and a 125% hard to borrow rate if they were able to locate any and Etrade offers to locate if you are willing to pay a “Hard to Borrow’ rate of 90%.  The “Goto” place to find shares available for hypothecation, ( (Interactive Brokers) could locate a total of 9.000 shares available for shorting, if you are willing to pay a 104.71% borrow rate.  The near impossibility of shorting this stock (other than intra-day naked short sales that must be covered before the close) is not that surprising given that 52% of the tiny public float is already sold short.  What is surprising is that momentum traders do not seem to have discovered this yet.

 

March 5, 2018 at 2:30 pm 2 comments

LFIN Target or Not, LMFA Shorts May Be Cornered

There have been rumors circulating over the last few days that high flying Longfin (NASDAQ: LFIN) may be about to put its highly appreciated stock to work as acquisition currency to take over LM Funding (NASDAQ: LMFA). On its face, the deal makes some degree of sense. LFIN’s stock valuation of $2.6 billion begs to be put to good use acquiring assets that could help the company generate revenue. LM Funding’s business model is attractive (see investor deck explaining how they make $3 for every $1 invested), highly replicable in markets nationwide if properly capitalized and thus Longfin’s access to capital and technology could allow the business to grow exponentially for years to come. Also, Longfin’s stock traded lower as the market traded higher yesterday and LMFA traded higher on no news and held those gains as the markets sold off later in the day. Thus, the market action for each certainly looked like what we often see with an acquiror / acquiree situation. This deal could certainly happen and there are plenty of reasons why the executives of each should consider making it happen. Is it a work in progress to be annoucned next Monday or just another rumor? We do not know.

What we do know is that LMFA is severely undervalued by at least 50% based on its core operations alone and we think this is happening due to heavy handed action by short sellers, who as of the last NASDAQ report had sold almost 50% of LMFA’s tiny 1.01 million share public float short.  It appears that short sellers have been spreading many distortions about LMFA in hopes of keeping the stock from rising back to a level that might be expected given its debt free prospects. Most recently they have been claiming that Esousa (the NYC Hedge Fund who bought all of LMFA’s long term debt and converted it to stock at $1.78 per share) has sold all of their LMFA stock and left the building. They claim that the most recent 13D/G filings give evidence, because Esousa has not filed a 13D and such a filing is required within 10 days of taking ownership of 5% of more of a company’s outstanding shares. But the reason Esousa has not filed a 13D is because their stake in LMFA could not be effected until the passing of 20 days past the mailing of notice of the issuance of the shares in accordance with NASDAQ RULE 14(c)-2(b). Given that the key “mailing date” of the written notice was January 31, 2018, the VERY EARLIEST the stock placement could be effected would be February 20th (yesterday). You can’t sell shares whose issuance has not been effected yet.  And you don’t file a 13d for 5% ownership if you don’t own those shares yet.  If the earliest possible date Esousa could take ownership of the LMFA shares was February 20 (yesterday) and the stock went up over 5% on the day, we think it is fair to say that Esousa has not sold all of its shares and it did not appear that there was any significant selling. While we can not confirm the specifics of the date that share issuance will be “effected” (in the event it was not on February 20th or 21st) but the market action alone (up over 5% on a down day for the broader markets) leads us to believe that Esousa was not selling shares yesterday.

It appears that Short sellers wanted investors to believe two things:

1) that the 1.01 million share micro-float of LMFA had tripled to over 3 million due to sales of Esousa’s LMFA stake. While a 3 million share public float would still be very small by any measure, it gives shorts much more breathing room than a jaw-droppingly small 1.01 million share public float that can attract investors who might buy it just because they know any uptick in buy side interest with such a small float can lead to very large if not exponential gains. So despite all the postings and noise from the shorts, we believe that LMFA’s public float is still 1.01 million shares.

2) Short sellers also wanted investors to believe that a highly regarded technology investor like Esousa would buy LMFA’s debt, convert it to stock and then dump it immediately. This gives the impression that once inside they took a closer look at the company and thought there was no hope for significant gains. This in turn would cause other investors to lose faith in the company and sell their shares. This is what the shorts need to happen because the float here is so small and the short position so large that they have very little room to maneuver.

The bottom line here – it appears that short sellers are getting more aggressive because they are in a pinch. We do not believe that the public float for LMFA has changed due to the Esousa stake because the filings indicate that the share issuance to Esousa could not be effected before yesterday and therefore we do not believe that they could have sold all of their stock.  Additionally, it is unlikely they would start to do so given that the stock is SO FAR BELOW THEIR CONVERSION PRICE OF $1.78 PER SHARE. Also, Esousa is quite familiar with the potential of buying a very large percentage of a tiny company’s float – see what they did with NETE, where they bought a huge stake and saw the stock go from $3 to $33+ in a very short time frame. Should we believe the short sellers when they try to tell us that Esousa did the same thing with LMFA (where Esousa took an even bigger percentage stake of s smaller company) but now they want to sell that stake at a loss?

We don’t think so. We think Esousa’s getting the stock is only the beginning of the story. We think it is no accident that LMFA recently hinted (through their last press release) of an increased focus on technology (without using the B word). And we think short sellers are insane for risking UNLIMITED LOSSES for a potential 20% takedown. But it appears that is what is happening here. And we think they may be taking on more risk than they realize.  Take a look at the number of shares that are truly available to be traded –

In summary, we think short sellers have been working overtime to try to keep LMFA trading at these levels but the ever shrinking public float may be about to put them in the corner. We think Esousa’s influence as a lead investor in blockchain technology companies could start to cause investors to reassess the potential for LMFA because we know that Esousa bought their stake with a plan to help LMFA take steps that will make their stock worth substantially more than the $1.78 per share that Esousa paid.  We believe the float is now so thin that any catalyst could cause a run on the shares and even no catalyst at all, just simply investors buying enough shares to cause the short sellers to start buying back the half of the float they have sold short.  When we start to hear rumors of buyouts (like the LFIN rumor) we think less about whether its actually going to happen and more about whether it will cause investors to start buying the stock.  With so many shares already taken, the supply of shares to meet any uptick in demand is insufficient (just a few hundred thousand) and we believe an uptick in buy-side interest for any reason could cause LMFA to move substantially higher.

February 22, 2018 at 3:30 am Leave a comment

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