Monday, 29 May 2017

PKK Releases Q1 Results: Holding My Target Steady at $0.50

Peak Positioning Technologies (PKK.C) (PKKFF) released Q1 results. They were nothing to write home about with $7.3 million in revenue and a net loss of $661K. However, the company had already prepared us for a weak Q1 as it is in the midst of another pivot into the much more lucrative lending opportunity. This has delayed transactions on the Gold River platform that require lending which caused revenue and margin to fall far short of original expectations.

While the company will be challenged to meet previous EBITDA and revenue targets, I remain bullish with my $0.50 target as I like the direction the business is headed. PKK management is trying to be as transparent as possible while some shareholders are still a little confused. I believe we will get clarity soon enough as PKK has promised an updated presentation on ASFC which should be coming in the next few days and advances on the ASFC business by the end of June.

Here is the outlook for 2017 from the Q1 MD&A:

































Key points:

  • Margins are expected to increase drastically once the lending business is live. While the raw materials transactions are expected to earn margins of 0.5% to 2%, the interest revenue expected by financing these transactions range from 9% to 24%.
  • Two major milestones need to be achieved in 2017 - the launch of ASFC and Cubeler. 
  • Cubeler will be a service available to lenders outside of ASFC.
  • ASDS has been in discussion with potential lending partners. 
  • Peak expects to announce ASDS' first lender platform agreements by the end of June. This leaves open for the potential of a "name drop" that could move the stock price. Although it is just as likely that any deals signed will be with an obscure Chinese firm that will be very important for business development but won't be the source of a news release fueled pop. 
PKK remains consistent with a lot of promises made in a short time frame. I remain cautiously optimistic that the company will adhere to these timelines and that we will hear a lot of about ASFC over the summer. 

Sunday, 21 May 2017

Private Placement Opportunity: Torino Power Solutions

Torino Power Solutions (TPS.C) private placement of units priced at 7.5 cents with 15 cent 24-month warrants. Closing price on Friday was 15 cents.

CLICK HERE FOR THE SUBSCRIPTION DOCUMENTS YOU MUST FILL OUT TO REQUEST PARTICIPATION

I participated in the private placement for TPS last week. Management has a goal to close it on May 24th, and by the looks of the market price, there is good reason to suspect it will be filled or oversubscribed. However, it doesn't hurt to try to get in at the last moment. I wanted to tell people about this sooner, but I've been busy and there are risks associated with this investment that I wanted to explain. So this write up will take me a while. At least people will have a couple of days to make a decision as well as can use this as a primer on the company should they wish to buy shares on the open market.

Why did I participate in this placement? It should be obvious by the stock price. This is pretty much free money if you can wait out the four month hold period and the stock price doesn't hemorrhage 50% back under 7.5 cents during that time. If I was not able to get into the private placement I probably wouldn't buy shares on the open market at this time, but I would keep a close eye on it on my watch list. In the event of big news, I'd rather be one of the first ones in at 9:30, at say, 20 cents, than alerted by price-volume leaders at 9:45 and have to pay 30 cents or more. I believe that TPS has potential for that kind of move.

TPS has a clean balance sheet (meaning no debt other than a small amount of payables), around 33 million shares outstanding and around 40 million fully diluted. After this financing closes it'll have around 40 million shares outstanding and 50-55 million fully diluted. The float on it is ridiculously thin. Look at this L2. As of this writing there is less than 100,000 shares on the ask to 19 cents.

If there is good news on this stock, I can see it racing to at least 30 cents and possibly as high as a dollar in short order, depending on the news. If there is no news and the stock price stagnates, all I have to do is hope it stays in this range or at least above 10 cents in four months when the hold period expires. Having such a thin float does present a risk too, should everyone in the private placement decide to sell shares as soon as the hold period is up and it does tank below 7.5 cents on that selling pressure.

If you fail to get into the private placement and wish to trade the stock, be my guest. Unless there is news between now and when the hold period expires I do not foresee myself trading or talking about this stock in depth. So come back in September because I think that's when things will start to get interesting.

REQUIRED READING:

All news releases and financial statements listed on SEDAR and the listing statement which looks like the equivalent of an IPO filing for the CSE:

http://thecse.com/sites/default/files/Form_2A-Torino_Power_Solutions_Inc._Listing_Statement.pdf

I'm not going to handhold people through the process so if there's a statement that I made that you're having a hard time finding the source, look through this required reading. 

Summary of the Business

TPS is pre-revenue. That means Torino hasn't made a sale yet. The business is summarized as follows in the listing statement:

"The Corporation is commercializing its patented Dynamic Thermal Circuit Rating (DTCR)
technology and proprietary system architecture for application in overhead transmission lines to address the growing demand by electric utilities to adequately increase the capacity of congested transmission lines of electric utilities in North America and Europe. The Corporation does not currently generate revenue. The technology is supported by five existing patents and two pending patents.
"

There is an issue with electric utilities. They don't want their power lines failing so they limit the capacity that they transfer. If there is no direct monitoring, power line stress and sag is estimated and conservative values are used based on past seasonal weather patterns. Management believes that Torino's patented sensors and Interrogator system will enable power utility companies to increase their capacity by 5 -20%. According to the listing statement:

"The patented technology enables the monitoring of the dynamic thermal circuit rating of
transmission lines. At time intervals predetermined by the requirements of the utility operator, the technology monitors the temperature and stress of the transmission line conductor as well as the meteorological conditions. The system consists of two major subsystems; a passive part which is a microwave resonant cavity sensor and an interrogator which is an active component. The sensor is installed on the conductor; the interrogator is installed on the pole in a safe zone area.
"

Torino is not the first company to come up with such an idea. There are four other competitors named in the listing statement that sell these types of sensors.This market is not saturated so I have two schools of thought on this. Either there is just not a great enough demand by utilities for this kind of product, or what's available on the market is not meeting the needs of power companies. Anyone from Ontario like me knows the absolute debacle surrounding Ontario Hydro, with the government of Ontario (rightly) taking a lot of heat. Capacity issues will only increase with time as the population grows, particularly in regions under stress already like the Greater Toronto Area. So I am willing to give this sensor industry a shot.

Torino believes that it offers a superior product. I believe that the key two advantages over its competitors based on my conversation with the CEO are 1) the system doesn't need a battery nor a power source and 2) the system can measure sag AND conductor temperature of a single line while competing technologies measure either sag OR conductor temperature of a single line. TPS has gotten FCC approval in the U.S. and Industry Canada approval in Canada to operate its Power Line Monitoring system within the specified frequency band last fall. This was obviously a major required step needed by the company in order to proceed with a marketable product. The company's technology was developed at the University of Manitoba and the company owns all patents and design outright. There are two milestone payments of $250,000 each upon achievement of $10 million and $20 million in revenue.

So far TPS has announced a trial relationship with one power company, Tri-State Generation and Transmission Association, Inc. The agreement was signed in June 2016. In March the company announced that this trial agreement was upgraded to a more active power line. My first reaction when speaking to the CEO was that this is a VERY long lead time between a trial agreement and a potential revenue-generating agreement. However, I also noted that TPS is only asking for $500,000 in this private placement. Based on the burn rate, I estimate that this money would only take Torino to the end of 2017 if no sales are made. It would make sense to raise a lot more unless there was the expectation that revenue will be coming in 2017.

After speaking with the CEO and considering the small raise, I think there is a reasonable chance to expect some kind of revenue-generating agreement in 2017. Though the exact nature of that is unknown to me, for obvious reasons he had to be vague. There is also no guarantee that there will be an agreement announced in the coming months and that the company will need to raise more money in the near future. Each system which contains one Interrogator and three sensors would cover a 12 kilometer radius. As in other words, a typical-sized power company which wanted full coverage would need to order thousands of devices. Even one which wanted to cover only the areas under high stress would need dozens or hundreds. So there is reasonable potential for a news release on a massive sale. 

The CEO called Torino an IIoT (Industrial Internet Of Things) company. It sounds like they are looking to capitalize on the growing IoT craze which would be a smart strategy to ensure a robust stock price along with executing on the business.


Management Team

The person who I spoke with was CEO Rav Mlait. His business associate, Bryan Loree is the CFO and these two have collaborated on numerous projects in the past. When I spoke with Mr. Mlait, he was courteous and appeared knowledgeable of the opportunity. However, the management team of TPS doesn't appear to be on the level of the management teams of my other major investments.

People like the Itwaru brothers or PKK's management are business builders. If you look at their CV, they have a history related to payment processing, fintech and business development in China, respectively. Their prime focus over years has been on their duties to the companies in which I'm invested.

Contrast that to Rav Mlait. Have a look at his LinkedIn profile. He and Bryan Loree have had multiple projects, some of them ongoing simultaneously. Mr. Mlait is the CEO of Cannabix Technologies (BLO.C), a marijuana breathalyzer development company and was the CEO of Rockland Minerals Corp, an exploration stage mining company. He jumps from industry to industry. Rather than being a business builder like the people I just mentioned, he appears to be an early-stage promoter. If he wishes to become a business builder with TPS and BLO, he will have to prove that to the market. In the listing statement it states that he expects to dedicate 35% of of his time to TPS, though that may be higher now since he has given up his position with Rockland. But that is still much less than the proportion of time dedicated by Andre Itwaru to FGD or Johnson Joseph to PKK, for instance.

Regarding his past mixed history of success, I am going to give him a pass. The very nature of start up investing is high-risk. Many companies fail for every successful one. If you were an investor in Mr. Mlait's companies in the past, you might have lost money on several of them, but then made 500% or more on BLO. A consistent early-stage investor in all of his projects would have made money under his watch.

The first major test for Mr. Mlait with TPS would be upon a major contract being signed. I asked him about manufacturing and right now it is all in-house which he described having capacity to build "a few" units. What would happen if a major deal gets signed and a power company orders 1,000 units? Would the company outsource? Or try to build capacity in-house? The latter option is filled with operating challenges and risks. The former option might result in lower long-term margins and the company would be reliant on its supplier to make good on orders. The CEO's answer wasn't very clear to me. That could be indicative that he has a plan in place but can't disclose that to me or anyone else, or that there isn't one in place yet.

Torino's lack of size might present a challenge to its sales strategy since its competitors are more mature and may have the capacity to fulfill larger orders. Power companies would know this. So even if the technology is superior, the manufacturing capacity puts Torino at a disadvantage. There are ways around this which an early-stage promoter would understand and may actually be better suited for this company - discussed in the next section. 


Conclusion: What I Think Will Happen

Based on my conversation with the CEO and the small size of the raise, I think TPS has a reasonable chance to procure a contract in the coming months. Once a contract is announced, it might be a good time to offload some shares on the spike. There could be another substantial private placement to raise funds to build the capacity to fulfill the order. Or there may be other challenges that arise as the management team tries to build a business.

However, as demonstrated early-stage promoters, Torino's management team may have other ideas in mind. Rather than build the devices themselves, maybe they plan to license the technology. Or perhaps they are fishing for a buyout that will come at a much higher valuation upon further proof of concept with Tri-State or upon a large contract being signed. Early-stage promoters look for an early entry and an early exit to gain a quick profit.

No matter what the eventual outcome, I think TPS can return me several times my money in a timeline measured in months if a contract comes. Hell, it's already given me a double (excluding the value of the warrants) and I just wired the money a couple of days ago.

If I'm wrong and no contract comes in 2017, I think the TPS management team's skill as early stage promoters will be helpful in keeping the stock price robust enough so that I can sell the shares if I so choose to at a price well above 7.5 cents and keep the warrants as gravy over the next two years. The risk-to-reward payoff of this private placement made a lot of sense to me and that is why I participated in it. If TPS makes a lot of sense to you as an investment, either as a private placement or by purchasing shares on the open market, I have made a Facebook group for this investment, Torino Power Solutions Private Placement Opportunity and Investor Group:

https://www.facebook.com/groups/302777856828727/



Wednesday, 17 May 2017

First Global Data: "First in the World" Social Messaging Multi Integrated Remittance Platform

First Global Data (FGD.V) (FGBDF) announced that it completed the first phase of beta testing with LianLian Pay to provide remittance functionality on WeChat. The company made the bold statement that it "believes that this is the world's first social messaging multi integrated remittance platform whereby SOCIAL converges on FINTECH in the flow of cross border money."

A deal between Western Union and WeChat sounds kind of similar at first, and was brought up by some naysayers against the stock. Instead of going to FGD management for clarification, they assume the worst about this deal. I decided to make myself useful and sent the following email to CEO Andre Itwaru earlier today:



This was Andre's response:



So when people bring up what looks like competition or that the company is over-embellishing their accomplishments, make sure to dig deeper. I am very pleased with Andre's response. Many companies I have dealt with have been evasive when interrogated like this. Andre gave a very straight answer.

If one is wondering, "well, it may not be as integrated, but Western Union still has a deal with WeChat. FGD and LianLian won't be the only player in town". Remember that a fully integrated tech solution is far more sticky than a marketing deal. In my opinion, a deal like this for FGD makes it a buyout target for Western Union. If Western Union has the marketing deal and FGD has seamless integration into the platform, it just makes too much sense for Western Union to go after FGD in order to solidify its position on WeChat. Or at a minimum look for a friendly collaboration. The platform must be proven first and it is just in the beta testing phase so it's not there yet. Don't go rushing out to buy the stock just because I said it was a buyout target. Use your head and come to your own conclusions.


Tuesday, 9 May 2017

Facebook Private Message FAQ

When I created the investor groups on Facebook, I thought it would be a great tool for users to discuss stocks honestly using their real identities, instead of the untrustworthy atmosphere of other message boards where people can hide behind profile handles or multiple profiles. I didn't set them up to be a personal babysitter for people's investments. I was in a good mood today because while FGD tanked, I have had a great streak of luck on day trades and options trades recently, which has enabled me to free up some cash and take advantage of a buying opportunity today. But that good mood was soured a bit when I had to answer a bunch of messages on Facebook. Now that I'm back at my computer I see a whole bunch more. So I'm setting up this FAQ to minimize the amount of personal messages I get. A good day for me will be when I finally get zero personal messages that day.

Q1: Are you still holding PKK, FGD, SCG and PEEK? What about other stocks you've mentioned?

A1: I will start this off by saying I feel insulted when I get questions like this, like I'm some kind of penny flipper after I wrote extensively about these stocks. I have VERY large positions in these four stocks, in that order by dollar value. It would take me multiple days to sell my positions if I wanted to, and I have no reason to at this moment. Like any normal person I do buy and sell to manage cash flow and maybe take advantage of a short term trade, but I'm still going to hold large stakes in these stocks. For instance, I recently had to make some tough choices in order to participate in the SCG private placement. Luckily the winning streak I've had allowed me to buy back some of what I sold already and I'm optimistic that I can get most of it back. But I certainly would not sell everything.

If one day I sell one of these stocks for good I WILL MAKE A STATEMENT THAT I SOLD.

This also greatly irritates me because it comes with the assumption by the sender that I'm on Facebook 24/7 just waiting to answer their messages. I often take more than 24 hours to respond. I do this partially to slow the message flow down because as soon as I send a message I get a response back 10 minutes later and I'm back at square one. Other times I'm just not on Facebook or near a computer in general. Especially during the summer.

New policy: You get ONE chance, of which I will direct you to this FAQ. And if you continue to ask me through private message if I sold out of any of these four stocks, I will block you and remove you from the Facebook groups. This type of question is very annoying and insulting to me, and I don't want to see any more of it.

I'll add this in because I have officially written about these stocks: I still hold a small amount of SJL (sold most of it) and that I sold my DGO and HRE positions (still hold my HRE warrants), partially to fund the aforementioned SCG private placement. All other stocks that I may have talked about buying on the boards but didn't make an official article or target or anything like ITT, RHT, ONC etc. I have sold. I've also stopped posting on that Canadian Traders group because I got too many PM's asking me about this and that trade. I might buy these stocks back in the near future. Nothing against them, I just saw better opportunities. Namely the SCG private placement and if people have seen the performance of SCG since then, they can understand that I made the right move. 

Q2: So how are PKK, FGD, SCG or PEEK going? Do you have any special insight?

A2: Any insight I have I WILL POST ON THE GROUPS OR IN AN ARTICLE. If you have a question about a stock, POST IT ON THE RELEVANT GROUP. So I'm not the only one burdened with answering it.

Q3: Hey, how's it going?
A3: Lousy, because I'm answering Facebook messages like a secretary instead of doing something I enjoy. If you have something important to say get to the point. No more small talk please. No offense don't take it personally. I just get a lot of this and it gets tedious real quick. 

Q4: Do you want to hang out some time?
A4: I've never been asked out on so many man-dates in my life lol. It would be cool if more women were into the stock market. I plan to have a get-together one day in a larger group, but when these stocks are higher. These stock prices aren't acceptable for celebration for me just yet. As far as one-on-one meetups, I can be open to it, just be cognizant of where I live. I'm in the northeast end of the GTA. If you ask me to meet at something like 600 King St West I am going to be very irritated with that location. I didn't leave the workforce because I enjoyed the time it takes me to get downtown.

Unlike questions 1 and 2 I won't be pissed off with things like this. Or business opportunities or random, interesting conversation that leads to something important not like Q3.

Q5: What do you think of x stock? Or have a look at x stock.
A5: A 99% chance I don't know it, or I know the name and a very basic knowledge of it and don't have any good insight to share. Particularly if its a commodity stock. You people JUST saw me try and fail miserably with DGO. I don't know the junior/explorer mining or oil industry. Why are you asking me about these stocks?

Acceptable way to approach me with Q5:
There's this stock with a good balance sheet, strong earnings, good growth and I think is undervalued.
A: Thank you, I'm always looking for more of these types of stocks. I will take a serious look at it.

That's all I can think of for now. I might add more later.

Monday, 24 April 2017

My Preliminary Thoughts on PKK's Latest Pivot

Peak Positioning Technologies (PKK.C) (PKKFF) released an updated investor presentation and news release this morning following its attendance at the GCFF conference in Vancouver. I don't have enough information to release a full blown article but I thought I would share some quick thoughts. I plan to update it once the company has released Q4 and provided official guidance.

Peak has pivoted once again into more lucrative businesses with the introduction of Asia Synergy Data Solutions (ASDS) and a proposed financial institution Asia Synergy Financial Capital (ASFC). ASDS teaming up with Cubeler sounds a lot like what LongKey would have been, except with the backing of ZHWY Enterprises. ASFC is the method for Peak to try to increase its margins as it looks to bring the lending component of the Gold River platform in-house.

With these pivots which will obviously be very good for the long-term, it sounds like there will be some short term "pain" in that Q4 revenue probably won't come in as expected. I'm not too disturbed by this. We know from a prior news release that PKK will be recording at least $50 million in revenue for 2016. Going from $0 to $50 million in revenue in a year is still a monumental accomplishment, even if it's a little less of an accomplishment than going from $0 to $100 million a year.

On page 23 of the presentation, there are two numbers referenced for AST in 2017. $503 million in revenue and a $10.8 million number which isn't clear if that's gross margin or EBITDA or something else. Assuming that is the case, this would be below previous guidance of a 3-5% EBITDA margin on $550 million in revenue stated in the Q3 news release. Offsetting that is the $1.4 million in projected revenue for ASDS in 2017 and the unknown benefit of ASFC assuming it goes live as planned some time in 2017.

Based on this, it looks like PKK will take a little longer to get to my $0.50 target as first planned, at least justifiable from financial ratios. There always remains the possibility that speculative investors will like this new business and bid up the stock to very high valuations in the near term. But by 2019 revenue for AST and ASDS is expected to be a combined $887 million. It's difficult to project such a fast growing business two years out, but if these numbers do in fact come true with $50M in EBITDA or greater, a $0.50 stock price should be more than justified.

Assuming the $10.8 million number is EBITDA for 2017, this still justifies my first target of $0.20:

$10.8M x 15 EV/EBITDA multiple = $162M EV
$162M EV + $10M in cash from exercise of warrants and options = $172M market cap
$172M / 678M fully diluted shares = $0.25 per share

There was a small sell-off this morning to 14 cents after the warning about the negative impact on the near-term numbers and some of the ambiguity around these projections. Buying has picked back up and the stock is trading at 15 cents, down a penny. I think it is reasonable to assume that Q4 will be disappointing relative to previous guidance (but still great compared to where the company was in 2015). However, 2017 guidance could go in either direction depending on how quickly PKK can get ASFC up and running. For now, I think we should assume revenue just slightly over $500M and margin/EBITDA slightly over $10M, but even that should support the stock price where it is now.

With this pivot there is no guarantee of success for ASFC or even that it will get off that ground. But that's why PKK is trading at a fully diluted market cap of $100M and not much higher. I remain confident of my heavy investment in PKK, other investors can figure out for themselves if they share that same level of confidence.

EDIT: This is what PKK's CEO Johnson Joseph had to say shortly after I released this piece:




Wednesday, 5 April 2017

First Global Data Valuation Matrix

A few weeks ago, I presented a $5.00 target on First Global Data (FGBDF) (FGD.V) by the end of 2018. This target assumed that the company can achieve 5 million users at an average EBITDA per user of $26 by that time. It was based off of a 15x EBITDA multiple, 400 million fully diluted shares and $52 million in cash received from the assumption that all warrants and options would be exercised. Presented below is a chart that displays a matrix of potential stock prices based on a range of 100,000 to 100 million users and an average EBITDA per user from $10 to $90.


The scenario closest to my target price assumes 5 million users at a $25 average EBITDA per user, which leads to $4.82. To get to $4.82 it is calculated as follows:

5,000,000 users x $25 EBITDA per user = $125 million EBITDA
$125 million EBITDA x 15x multiple = $1,875 million enterprise value
$1,875 million / 400 million shares = $4.69 per share
$52 million in cash from warrants / 400 million shares = $0.13 per share in cash
Add back $0.13 per share in cash to get to $4.82

(Read up on what enterprise value means to understand why I add the cash back in this situation - I'm sick of answering questions like this)

If someone thinks that a 15x EBITDA multiple is too high, it is easy enough to change it. If you wanted to use a 10x multiple, all you need to do is subtract the $0.13 per share in cash, multiply that number by 10/15 and add back the $0.13 per share. For instance:

$4.82 - $0.13 = $4.69
$4.69 x 10/15 = $3.13
$3.13 + $0.13 = $3.26 per share valuation based on a 10x EBITDA multiple

FGD's CEO Andre Itwaru has gone on record to state that based off of one million users, he thinks FGD can achieve $146.1 million in revenue and $93.5 million in EBITDA (page 11 of the January corporate presentation). This is a $146 average revenue per user (ARPU) and a 64% margin, leading to a $93.50 average EBITDA per user. Keep in mind this assumes a 50-50 split in revenue between FGD and its partners, so gross ARPU would be $292. Until I see ARPU figures proving otherwise, I personally think that these numbers will be a challenge to meet. That's why my chart ranges as low a $10 EBITDA per user and up to the company's estimate of $90. Assuming a 64% margin, a $25 average EBITDA per user equates to a $39 ARPU.

We know that based on the Google Play install stats that VPayQwik, FGD's app in partnership with Vijaya Bank, is over 100,000 users. I estimate the installs to be at least 130,000. Keep in mind that this is only for India. VPayQwik was launched in mid-September 2016 so the revenue and profits disclosed by FGD for the first nine months of the year was largely based off of the company's North American remittance business. FGD hasn't disclosed how many users it has in North America, but we can assume this is substantial and growing based on the Alexa traffic stats for FGD's business site firstglobalmoney.com.


So how many users does FGD have? Something well over 100,000 and growing. If FGD has 500,000 users at an average ARPU of $39 and average EBITDA per user of $25, that leads to a $0.60 stock price. Of course, at this early stage FGD won't be valued based solely on current business metrics, but the reasonable expectation of growth since the Indian and North American businesses are robust and the various partnerships announced over the last several months will be deployed soon enough.

I have already stated my belief that the company can achieve 5 million users in a timeline of a little over a year and that leads to substantial upside even if the ARPU comes in at around 25-30% of the company's expectation. Let's look at the long term upside. Let's say that FGD eventually does achieve 100 million users. This could take several years, but it is well within the realm of possibility upon continued execution and deployment of partnerships. 

Let's say that of those 100 million users, a lot of them are low value and that drags down the average ARPU. Given FGD's focus on the developing world that may be a fair assumption. Even if the annual EBITDA per user is a mere $10, the stock price would be $37.63 based off of a 15x EBITDA multiple. If the company is extremely successful and somehow manages to pull off a $90 EBITDA per user on this large base of 100 million users, the stock price would be $337.63 based off of a 15x EBITDA multiple.

I don't know if FGD will ever get to these crazy prices, or if it will be bought out well before then or if I would even hold that long. But at $0.80 this isn't a concern yet. FGD has a ton of upside from here as my valuation matrix indicates.





Monday, 30 January 2017

Analysis of Keek's Q3 results

Keek (KEEKF) (KEK.V) posted its financial results and MD&A on SEDAR. Here are my thoughts and/or highlights of what I find to be the most important issues:

  • There is a line in the MD&A which states: "The Offer Box is currently in development and deployment to the Peeks service is now expected during the 2018 fiscal year." At first I had a WTF moment, until I realized that fiscal 2017 ends this February. Fiscal 2018 runs from March 2017 to February 2018. My best guess is that we're probably looking at a March-April timeline, but Mark Itwaru is keeping his cards close to him this time, and not giving us a more definite timeline.
  • The iOS disruption details are as follows: "On January 16, 2016, the iOS version of the Peeks app was removed from the App Store by Apple. The iOS app was deemed to be non-compliant with Apple’s App Review Guidelines, specifically in that it required improvements to control the display of user generated content of a mature nature, and the addition of in-app purchase capabilities. The removal of the iOS version from the App Store has caused a significant negative impact on new registrations and the general growth of the platform. The Company expects the iOS version to be available again in the very near future. The Company expects that growth rates across all metrics will be restrained until such time as a new iOS version can be released to the public. Should that require an extended period of time, the Peeks service may see a period of decline in user activity. However, in the week following Apple’s decision, it is estimated that transactions on the service had still increased approximately 40% as compared to the last week of December 2016."  
  • The bad news - the company is non-committal over the timing that the iOS issue will be resolved. There is also some ambiguity around the "in-app purchase" capabilities. One shareholder and I have been discussing Apple's TOS for developers and if paid streams constitute an in-app purchase and are therefore subject to going through Apple's payment systems. The good news - even without Apple the disruption was temporary. Transactions are still up 40% versus the last week of December.
  • Revenue was $6,810, split evenly between ad revenue and tipping revenue. This covers only the first few weeks of Peeks being live in November, so this low amount doesn't worry me.
  • Total opex was $1,520K. This includes $850K of stock compensation expense. Excluding this number, as well as the gain on disposal of a long lived asset (-$67K), FX impact ($26K) and amortization ($20K) leads to $691K in cash costs for the quarter. This is $230K a month, or slightly over the $150-$175K the company has previously forecasted. It's not egregiously over budget, but I think with the growth of the app, we can expect hiring so I don't think this forecast is applicable any more. However, I expect revenue to more that offset that in the future. 
  • The company made excellent progress in paying down its trade payables, as evidenced by a gain on the settlement of debts of $592K. In the subsequent events section, the company settled another $449K of payables for $161K, netting a gain of $288K. 501K of options and warrants with a strike price of $0.30 were exercised since November 30th, improving the balance sheet some more going forward. This is a smaller amount than I would have expected, so selling pressure hasn't come from warrant exercises.
  • No ARPU number, but I really like this paragraph in the MD&A: "Through December 2016 and into January 2017 the Peeks service saw significant growth across all aspects of the service including in the percent of transacting users and the number of transactions. On November 30, 2016, approximately 1.4% of registered Peeks users had a credit card associated with their Peeks account. By December 31, 2016, this number had increased to approximately 3.4%, and by January 15, 2016, had increased to approximately 6.0%. Similarly, the estimated daily average aggregate dollar amount of user transactions on the Peeks service (tipping and purchasing of paid broadcasts) in the last week of December was approximately 1,000% of the daily average in November 2016."
  • Revenue share to Peeks was 45% of all tips. Keek is entitled to 30% of that, or 13.5% of all tips generated in November. If Keek earned $3,400 in tips, the gross amount of tips on the Peeks platform for the period ending November was $25,000.
  • Using the above as a guide, if total tips were $25,000 for the month of November and by the end of December the run rate was 10 times that, that's $250,000 in tips generated on the platform. Judging by anecdotal evidence and observations collected by shareholders from a couple of weeks ago (~$20K tips/day), third party app usage stats and the credit card information presented above (6.0% vs. 3.4%), it looks like mid-January was 2-3x more active than the end of December. Note that the $250,000 run rate I calculate at the end of December ($8,000 a day) is quite aligned to anecdotal observations made by KEK investors on the Facebook investor group around that time ($5,000-$6.000 a day). However, this was prior to the Apple issue. The company claims that by the end of January that transactions were still up 40% over December. That would mean the run rate would be $350,000 without Apple. Probably around $700,000 with Apple once it does get back online.
  • If Peeks has averaged $300,000 in tips a month for December and January and if the revenue share stays steady at 13.5%, that would mean KEK earned $80,000 in total revenue for the two months. The run-rate of $350,000 means that KEK is at a $47,000 monthly revenue run rate heading into February. 
These are my observations after a quick look at the MD&A and financial statements. I may have more observations after reading this material again and letting it sink in.