Interview With Remark Management

Includes: MARK
by: John Gilliam

Questions were submitted from SA community to Remark Management.

Top 20 Questions Chosen.

All questions below were answered by Remark CEO Shing Tao.

Q1) How many shares do you currently own?

A- All that I have ever bought, as I have never sold even one share.

Q2) Is Remark Entertainment the new name for the Fanstang assets? Will revenues and expenses for this be reported through Kankan or separately going forward?

A- Yes and No, revenues will be reported through Corp. We expect to be able to cancel those shares and we still have the assets but due to the many Chinese restrictions and the very low ROI on streaming there has been very little of that and probably will continue to be.

Q3) You mentioned that the Sharecare stake is one of the assets that is being offered for sale - could you give us a little more color on where you expect the value of that asset? For instance, in July Wells Fargo Strategic Capital invested $20m at an implied pre-money valuation of $2.6B. Based on the BOD discussions previously held on the sale of Sharecare, would you expect the Board to sell the entire stake if we could get the $+/- $120m that the Wells Fargo valuation implies our stake is worth?

A - Not my call it is up to the BOD as a whole, but based on what I have seen and also what I believe, No way, we would sell only a portion.

Q4) If you get enough cash from assets sale will you pay off entire debt or just a portion and refinance the rest?

A - We will first pay off debt in its entirety.

Q5) Do you expect the do a stock buyback if we have cash remaining after the debt is paid off?

A - yes but the final decision on that would be with the BOD.

Q6) Are you or any other insiders taking advantage of the ridiculous stock price to buy shares?

A - No, we would very much like to buy shares but we are restricted due to the sales process. If we buy today and Monday announce the sale of regulators would penalize us.

Q7) You mentioned last night that is currently in an auction process - what is the date that final bids must be submitted?

A - No hard date for obvious reasons but we would like to get a deal done by the end of the year. However, our lenders are very involved and understand the situation and so its not like we have a deadline to close the deal by 12/31

Q8) Can you provide some color on the profile of the bidders - are they strategic or financial buyers?

A - Both. Current bidders include Investment funds, Casinos, companies that own the shows we sell tickets for, daily fantasy sports betting and online travel companies have all made indications of interest.

Q9) Are and currently in a sales process?

A- No process but plan is ultimately to sell them when the right opportunity comes along.

Q10) One of the main drivers of investor skepticism regarding Kankan is their inability to see it being accepted in the US. What, if any, are the opportunities outside of China, especially in the US? I know that privacy laws etc are much stricter in US and this might limit some of the applications being offered in China, but is there any current use of it in the US and is there any chance we will see Kankan's technology used in the US?

A - We are currently working on a deal with a US retailer and possibly a European company too that we expect to announce over the next few months.

Q11) Could you provide a little more color on the process related to Kankan's participation at the World Internet Conf -

A - The Government audited KanKan technology, business contracts and talked to companies we do business with in that region before inviting to speak beside Apple, AliBaba etc. Do investors understand that this is not a privately owned organization doing the conf it is the regional govternment? And that has occurred twice......

Q12) Revenue guidance for Kankan in Q4 is $400k to $4.4m given what has been reported through Q3 and the full year $10m estimate. Can you help me explain to investors why that spread is so large?

A - The timing of some key deals was delayed and our ability to book that revenue in Q4 is dependent on things occurring that are out of our control, so was difficult to know if we would be able to book any of that revenue in Q4. Also, some deals have actually expanded, such that the scope of what we originally were to provide is only a portion of what we will be doing.

Q13) What are some of the additional features of Kankan that existing customers are asking for that were not in the scope of the original agreements that are causing deployment delays?

A - Originally just facial recognition but now wanting to move faster on inventory tracking and then the cashless checkout. Also fresh food applications are a new component as we bring food safety element to our AI offering.

Q14) Going back to the original $50m estimate for 18, we know $30m of that was fintech, but we still came up way short of the remaining $20m as it looks like the current estimate is for that to come in at $7-$10m for the year. Can you help me explain to investors - did some of the deals go away and/or did some of them just get delayed.

A - 7/11 installs for CP Group and restaurant/food service with Shanghai got delayed for different reasons, no deals have gone away.

Q15) Given what you shared about the reasons for the delays with CP Group's 7/11 stores - do you think we will still see the 10k stores using KanKan at all? Do you expect that we will see 10k installed in 2019?

A - Yes, we have the contract and it will get done but no way it will be completed in one year, this would necessarily be more like a two year process.

Q16) Earlier this year Remark announced the application of Kankan for the food service industry and gave a number of restaurants that will ultimately have Kankan installed. How many restaurants currently have it installed and how many restaurants do you currently have scheduled for install in 2019?

A - None - The local government is requiring it and we got the contract but they delayed the funding of it. We still have the contract but they delayed the funding so the project is being pushed into next year.

Q17) Of all the contracts announced last year, can you give me an idea of how many of them have been cancelled?

A - No one has cancelled any contracts that have been announced.

Q18) How many construction sites currently have KK installed? How many are currently scheduled for deployment in 2019?

A - I don't think I can answer that because of Reg FD and we have not been releasing that data.

Q19) How many 7/11 convenience store installs with CP deal as of today?

A - CP does not allow us to disclose how many or exactly which services are being installed there. But there was a major delay, the primary reason being Big Brother concerns and the public backlash caused them to slow down the deployment and also be very guarded with the specifics due to this factor, as they don’t want other companies to know what they are doing for competitive reasons.

Q20) We believe the biggest issue facing Remark right now as it pertains to investors is credibility and we feel that there is not enough disclosure and clarity. We hear about these impressive contracts but then the revenue doesn’t come through, no specifics are given as to how we are progressing towards completing those contracts and short sellers are happy to step into that information void to fill in the blanks. Will we get to a place where you will be able to share more specifics?

A - We are probably not going to provide a lot of detail on specific contracts for competitive reasons, but we are happy for investors to get on a plane and come with us to China to see it first hand. The guys making these claims that we are not doing what we say are message board hacks. We are looking for long term investors who understand the opportunity here. I understand how our credibility got knocked down with Fintech issue and the delays and also CFO leaving, but we are not looking for short term investors who can not see the opportunity here. We are not very far from being a pure play Artificial Intelligence company with a foothold in the fastest growing market for such services in the world where demand is exploding.

Disclosure: I am/we are long MARK. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

Additional disclosure: My intent in publishing this article is to inform investors about developments related to Remark Holdings. I did not and do not intend to suggest any specific action by any investor or shareholder and strongly suggest that any decision made to buy or sell shares of this stock be made after consultation with an investment advisor as to the suitability of such an investment. I currently own shares of MARK outright and in some managed accounts. I may buy or sell shares at any time based on market conditions and the trading price of MARK.