KODAK: NOT IN THE BLACK IAG FRIDAY NIGHT PITCH
Investment Analysis Group Friday Night Pitch
KODAK: NOT IN THE BLACK
Feb 23, 2018 Kaan Tuncel Nhi Tran Brooke Fuller Steve Zhang KODAK: NOT IN THE BLACK IAG FRIDAY NIGHT PITCH One-pager
Kodak is a zombie business: It is so outdated and past its time that it is used widely today as a synonym for 1 “company killed by new technology” Blockchain is not revolutionary enough to save KODK: Just like the internet in 1999, blockchain can be both revolutionary and 99% of blockchain enterprises can be 2 failures. Kodak Coin and Miner are not just doomed to fail, but almost fraudulent
Bankruptcy and SEC Investigations will kill: Kodak has significant debt that not only will it not be able to pay, but will fall afoul of the covenants on. Additionally it is likely the SEC will investigate 3 sketchy legacy management actions, providing a near term catalyst.
2 KODAK: NOT IN THE BLACK IAG FRIDAY NIGHT PITCH
Investment Analysis Group Friday Night Pitch
CRYPTO OVERVIEW
Feb 23, 2018 Kaan Tuncel Nhi Tran Brooke Fuller Steve Zhang KODAK: NOT IN THE BLACK IAG FRIDAY NIGHT PITCH WOW!
4 KODAK: NOT IN THE BLACK IAG FRIDAY NIGHT PITCH What actually is crypto? A very basic intro
■ A technology whose (ideal) goal is to create a decentralized, purely public and efficient ledger of transactions ■ Blocks: Large collections of transactions that include the key of the last block and so are arranged in order of time ■ The Ledger: The publicly available list of all verified blocks up until this point, stored on each of the 200,000 computers that participate in the Bitcoin network ■ Public/Private Keys: The “crypto” part of the equation
5 KODAK: NOT IN THE BLACK IAG FRIDAY NIGHT PITCH Different Cryptocurrency Assets Where’s the money? "Market-Cap“ Coin Purpose ■ Cryptocurrencies (bn’s)
Bitcoin $169.81 Cryptocurrency
Application $81.95 Ethereum system
■ Application systems Ripple $38.44 Settlement System
Bitcoin Cash $21.01 Bitcoin Offshoot
Litecoin $11.28 Cryptocurrency
■ Settlement Systems
6 KODAK: NOT IN THE BLACK IAG FRIDAY NIGHT PITCH Playing with numbers.. A lot of the metrics are flashy and useless
■ Market Cap is not an accurate way to measure anything in “coins” ■ Doesn’t‘ track total investment ■ Can’t compare it to companies: Equity market caps just track one slice of the business’ (tangible) value ■ Most of the owners are illiquid: Anywhere up to 40% of BTC is held by just 1,000 people
Top owners Comparing the two Market Caps is meaningless
■ JPM has a market cap backed up by more than $2.5tn in total assets. Bitcoin has nothing backing it up 7 KODAK: NOT IN THE BLACK IAG FRIDAY NIGHT PITCH It’s always about money… What’s the end-game Long Island Iced Tea Corp (now known as Long Blockchain)
■ Long Island Iced Tea Changed its name to Long Blockchain purely for stock promotion purposes ■ Previously only business line was in soft-drinks operations ■ “Long Blockchain Corp. is focused on developing and investing in globally scalable blockchain technology solutions.” ■ 15 million shares (vs daily vol of 170k)
Straight-up scams
■ Prodeum ■ Plexcoin ■ Raised $6.5mn ■ Raised $15mn before ■ Owner Dominic changing Lacroix has website to an been eggplant convicted of ■ Led to FB securities fraud Blocking crypto ■ Halted by SEC ads
8 KODAK: NOT IN THE BLACK IAG FRIDAY NIGHT PITCH It’s always about money… Probably misery
“…the NASAA release also reminds investors that when they are offered and sold securities they are entitled to the benefits of state and federal securities laws, and that sellers and other market participants must follow these laws. Unfortunately, it is clear that many promoters of ICOs and others participating in the cryptocurrency-related investment markets are not following these laws. The SEC and state securities regulators are pursuing violations, but we again caution you that, if you lose money, there is a substantial risk that our efforts will not result in a recovery of your investment.”
9 KODAK: NOT IN THE BLACK IAG FRIDAY NIGHT PITCH It’s always about money… What’s the end-game
10 KODAK: NOT IN THE BLACK IAG FRIDAY NIGHT PITCH It’s always about money… What’s the end-game
11 KODAK: NOT IN THE BLACK IAG FRIDAY NIGHT PITCH Partying like it’s 1999 The Blockchain has a short ledger…
■ The 1999 to 2001 tech boom was driven by a similarly revolutionary technology ■ As the internet’s new potential became more and more exciting, companies increasingly used
Blockchain today S&P in 1999
12 • KODAK: NOT IN THE BLACK IAG Friday Night Pitch IAG FRIDAY NIGHT PITCH Partying like it’s 1999 Natural selection A lot of these tech companies went on to found the current sector…
But most did not survive
$290mn MCAP $150mn Net Loss
$1.2bn MCAP KODAK: NOT IN THE BLACK IAG FRIDAY NIGHT PITCH
Investment Analysis Group Friday Night Pitch
KODAK OVERVIEW
Feb 23, 2018 Kaan Tuncel Nhi Tran Brooke Fuller Steve Zhang KODAK: NOT IN THE BLACK IAG FRIDAY NIGHT PITCH Company Overview
General Information Stock Price $ 6.25 Market Cap 266.1M n Headquartered in Rochester, NY Shares Outstanding 42.6M n Global commercial printing and imaging company with technologies in materials science, Debt/EBITDA 9.5x digital imaging science and software, and deposition processes Short Interest 20% n Provides hardware, software, consumables, and 52 Wk High 15 services to customers in various industries 52 Wk Low 2.95 (graphing art, commercial print, etc.) EV/EBITDA 2.1x n 2016 revenue: $1.6 billion n 6,000 employees
Past Three Months’ Stock Performance
15 KODAK: NOT IN THE BLACK IAG FRIDAY NIGHT PITCH Timeline From Cameras to Crypto
1880 1890 1900 1910 1920 1930 1940
“Kodak” is registered as a trademark; the first model of the Kodak camera appears Eastman Kodak George Eastman Company is commits suicide at age 77 George Eastman added to the Dow begins to Jones Industrial manufacture dry Average plates for photographers in Rochester
1960 1970 1980 1990 2000 2010 2020
Kodak had 90% Announcement Steven Sasson, an U.S. market share Kodak files for Chapter of KODAKOne electrical for film and 85% 11 bankruptcy and engineer at market share for Delisted from Dow announces it will stop Kodak, invents the cameras Jones Industrial making cameras digital camera Average
3 KODAK: NOT IN THE BLACK IAG FRIDAY NIGHT PITCH Management Overview
Jeffery J. Clark, Chief Executive Officer, Board of Directors ― Joined in 2014 ― Managing Partner of Augusta Columbia Capital, a private investment firm he co-founded in 2012 ― Won a boardroom coup in 1986, and took on his current roles ― MBA from Northeastern University
David Bullwinkle, Chief Financial Officer and Senior Vice President ― Elected July 2016 ― First joined Kodak in 2004 and has worked in several financial management roles at the company ― Responsible for leading finance, corporate development, internal audit, and purchasing teams ― MBA from St. John Fisher College
Mark Green, Chief Human Resources Officer and Senior Vice President ― Elected June 2014 ― Senior human resources executive with several leading technology companies ― Responsible for employee relations, compensation, benefits, and talent management and engagement ― Master’s degree in human resources and industrial relations from the London School of Economics
3 KODAK: NOT IN THE BLACK IAG FRIDAY NIGHT PITCH Business Lines
Print 3D Printing Software & Consumer & Systems & Packaging Solutions Film
Enterprise Intellectual Eastman Inkjet Property Business Park Systems
18 KODAK: NOT IN THE BLACK IAG FRIDAY NIGHT PITCH
Investment Analysis Group Friday Night Pitch
KODAKCOIN AND KASHMINER
Feb 23, 2018 Kaan Tuncel Nhi Tran Brooke Fuller Steve Zhang KODAK: NOT IN THE BLACK IAG FRIDAY NIGHT PITCH KodakOne Desperation in Business Form
■ “KODAKOne is a revolutionary new image rights management and protection platform secured in the blockchain that seamlessly registers, manages and monetizes creative assets for the photographic community.” 1. ■ Kodak’s crypto “business” is made up of two parts: ■ Kodak One: Online database platform managing Uses nice picture image rights by allowing photographers to license their without permission work . ■ KodakCoin: Crypto-currency used to pay “licensing” fees. Kodak gets the initial capital from selling these coins and fees from the platform 2. Sends cease or desist to user ■ Blockchain is not the solution to every problem [Using AI, obviously] ■ Pixel level differences: The system basically takes a photo and puts it through an algo that changes it into a set of numbers. But tiny changes in pixels can totally change the hash function, resulting in (to the computers) two totally different images ■ Web Crawling is the hard part: Going through the web to find the photos. Blockchain has nothing to add here ■ Accredited Investors: Makes it easier regulatorily, but limits buyers to only those with above $200k in annual income (like most photographers, right?)
User takes Pays photographer in down picture KodakCoins 20 KODAK: NOT IN THE BLACK IAG FRIDAY NIGHT PITCH Spot the Difference
21 KODAK: NOT IN THE BLACK IAG FRIDAY NIGHT PITCH Kodak Kashminer Desperation in Business Form n Mining: “Contract” – Miners add more currency into circulation by auditing active transactions to make sure the transaction value is valid and upholds on both sides. – Keeps bitcoin/block chain community open and decentralized. When there is no form of centralization, bitcoins are not backed by a universally trusted party but rather backed by everyone involved. n Kodak KashMiner
$14k bitcoin price (HA) Constant Hash rate 22 KODAK: NOT IN THE BLACK IAG FRIDAY NIGHT PITCH What does Kodak management know about Blockchain? Not much…
Eastman Kodak CEO: Jeffrey Clarke
AppCoin License Lead by Cameron Chell Spotlite Consults America Builds
WENN Digital CEO: Jan Denecke Kodak KashMiner Creates
KodakOne Bitcoins
KodakCoin
23 KODAK: NOT IN THE BLACK IAG FRIDAY NIGHT PITCH Kodak Coins Creators WENN Digital KodakOne began as an IP-troll
■ Kodak isn’t actually creating KodakOne or the KashMiner ■ WENN Digital: The company Kodak licensed its name to to make the coin ■ AppCoin: Consultant to WENN Digital on the coin ■ They’re owned by the same person ■ WENN Brings a lot of experience to the table (too much actually) ■ WENN previously created RYDE: a platform for paparazzi to take down celebrity photos.
24 KODAK: NOT IN THE BLACK IAG FRIDAY NIGHT PITCH KodakOne Desperation in Business Form
■ Cameron chell has a history of tech and stock fraud. He was: ■ Was banned from a Candian exchange for the improper sale of securities. ■ A known associate and business partner of a securities fraud convict ■ Fired as the CEO of the tech incubator and has a second board member of his tech company sued for a pump and dump scheme. Cameron Chell’s Business Address ■ Chell was also involved with two failed public companies
Slyce and Urthe Cast
25 KODAK: NOT IN THE BLACK IAG FRIDAY NIGHT PITCH KodakOne It will all come crashing down This doubling will go away
NYSE:KODK - Share Price Close
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5 +101% -84% 0 2013 2014 2015 2016 2017 2014 2015 2016 2017 2014 2015 2016 2017 2018 2014 2015 2016 2017 2013 2014 2015 2016 2017 2014 2015 2016 2017 ------23 23 23 23 23 23 23 23 23 23 23 23 23 23 23 23 23 23 23 23 23 23 23 23 23 23 23 ------Jul Jul Jul Jul Jan Jan Jan Jan Jan Sep Sep Sep Sep Sep Mar Mar Mar Mar Nov Nov Nov Nov Nov May May May May
26 KODAK: NOT IN THE BLACK IAG FRIDAY NIGHT PITCH
Investment Analysis Group Friday Night Pitch
CATALYSTS
Feb 23, 2018 Kaan Tuncel Nhi Tran Brooke Fuller Steve Zhang KODAK: NOT IN THE BLACK IAG FRIDAY NIGHT PITCH Bankruptcy Breaching Covenants Kodak Eastman $ in Thousands Debt Covenants 2014 2015 2016 2017E 2018E 2019E 2016 2017E 2018E 2019E Senior Secured Credit Facility 398 398 398 398 Revenue 2046 1709 1543 1501 1456 1412 Less: US Cash 154 154 154 154 % Change YoY -16% -10% -3% -3% -3% Net Senior Debt 244 244 244 244 Cost of Revenue 1586 1331 1160 1156 1121 1087 Gross Profit 460 378 383 345 335 325 Operational EBITDA 144 69 63 57 % of Revenue 22% 22% 25% 23% 23% 23% Covenant EBITDA add-back 22 22 22 22 Operating Expenses: Covenant Defined Consolidated EBITDA 166 91 85 79 Total Operating Expenses 413 287 243 240 233 226 Income from Operations 47 91 140 105 102 99 Senior Secured Leverage Ratio 1.47 2.68 2.86 3.08 % of Revenue 2% 5% 9% 7% 7% 7%
Senior Secured Leverage Ratio Limit 2.75 2.75 2.75 2.75 Operational EBITDA 239 171 144 69 63 57
Compliance? Yes Yes No No Free Cash Flow (138) (33) (98) (103) (109)
Significant Kodak has no Covenants Chance without ReFi Senior Secured Leverage Ratio Negative FCF Limit is 2.75x Kodak has already been in Chapter 11 – it doesn’t have a chance if it goes into technical or real default!
Potential Bankruptcy Dates Bankruptcy Value
Kodak Price Target 2019E EBITDA 57 1H19: Breach End of 2019: $396mn Target Multiple 5.5x Covenants comes due Enterprise Value $ 314
Less: Debt & Preferred 604 Plus: US Cash 154 Plus: $25m Crypto Assets 25 Equity Value $0
Basic Common Shares Outstanding 43 Implied Share Price $0.00 28 % Change -100% KODAK: NOT IN THE BLACK IAG FRIDAY NIGHT PITCH SEC Investigation Blockchain bites back
■ Kodak’s pretty transparent attempt at using this business to boost stocks without any underlying business rationale won’t travel far ■ Frauduluent Managers: The managers of the ICO already have a conviction history in stock fraud ■ SEC cracking down: SEC has started to look closely at them ■ Conspicuous Payday: RSU sale is very ~371k RSU’s suspicious ~$3mn payday
“This does not mean a doubling in the stock price” -Kodak CEO Jeff Clarke
“Pump and dump is a scheme that attempts to boost the price of a stock through recommendations based on false, misleading or greatly exaggerated statements.”
29 KODAK: NOT IN THE BLACK IAG FRIDAY NIGHT PITCH
Investment Analysis Group Friday Night Pitch
EPILOGUE
Feb 23, 2018 Kaan Tuncel Nhi Tran Brooke Fuller Steve Zhang KODAK: NOT IN THE BLACK IAG FRIDAY NIGHT PITCH Zombie Business
Kodak is a zombie business: It is so outdated and past its time that it is used widely today as a synonym for 1 “company killed by new technology”
3.5
3
2.5
2
1.5
1
0.5
0 2016 2017 2018 2019
Lev Ratio Limit Lev Ratio
31 KODAK: NOT IN THE BLACK IAG FRIDAY NIGHT PITCH Zombie Business
Blockchain is not revolutionary enough to save KODK: Just like the internet in 1999, blockchain can be both revolutionary and 99% of blockchain enterprises can be 2 failures. Kodak Coin and Miner are not just doomed to fail, but almost fraudulent
NYSE:KODK - Share Price Close
40
35
30
25
20 +245% 15
10
5 +101% -84% 0 Sep-23-2013 Sep-23-2014 Sep-23-2015 Sep-23-2016 Sep-23-2017
32 KODAK: NOT IN THE BLACK IAG FRIDAY NIGHT PITCH One-pager
Kodak Price Target 2019E EBITDA 57 Target Multiple 5.5x Enterprise Value $ 314
Less: Debt & Preferred 604 Plus: US Cash 154 Plus: $25m Crypto Assets 25 Equity Value $0
Basic Common Shares Outstanding 43 Implied Share Price $0.00
% Change -100%
Bankruptcy and SEC Investigations will kill: Kodak has significant debt that not only will it not be able to pay, but will fall afoul of the covenants on. Additionally it is likely the SEC will investigate 3 sketchy legacy management actions, providing a near term catalyst.
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