A Monthly Review of GeoInvesting’s Most Notable Activity – GeoInvesting December 2015 Newsletter

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Our Calls to Action

Money-making Moves that the GeoTeam Conveys to its Premium Members

  • December 10, 2015  American Capital Ltd. (NMS:ACAS) – Released article on ACAS calling into question details surrounding one of the company’s largest and most marked-up (fair value accounting) investments, Service Experts. In addition, we focus on a $140 million payment that was made to an unidentified employee of an ACAS unconsolidated subsidiary and buried deep in the company’s filings.
  • December 18, 2015 — Cadiz Inc. (NASDAQ:CDZI) – Reaffirmed our short thesis and ultimate price target of $0.00 for shares that recently traded at $4.20. All new information we have learned since the release of our articles here and here is consistent with our conclusion that the company is not going to get its sole project off the ground and that lenders only extended debt maturities for the company because they have no other option aside from default.  We believe the debt extension will lead to more equity raises and dilution that will only serve to fund compensation for management and the company’s law firm, and cover debt service.
  • December 23, 2015 — Educational Development Corpora (NASDAQ:EDUC) — The Company reported record Q3 preliminary results with revenues of $24.4 million, a 123% increase over revenues reported in Q3 2014. EPS also surged in Q3 to an estimated $0.34 to $0.37.  In addition, the company reported that month-to-date revenues in December had already doubled the revenues recorded in December 2014.

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Information Arbitrage News

News Before the “Rest of the World” Finds Out

  • December 11, 15 and 23, 2015 UTStarcom Holdings Corp (NMS:UTSI) A Form 13D filed on 12/14/15 provided insight into what investors can expect in the “purpose of transaction” section of the form. Activist investor Guoping Gu and his affiliates will own 31.7% of USTI’s outstanding shares at a cost of $6.00 per share.  The investors intend to obtain control of the company, appoint a new CEO, designate four more Board members, explore ways to increase USTI’s business and, ultimately, grow shareholder value.  It is unclear why the activists are willing to pay a high premium to the prevailing market price (recently $2.50).  13D/A filings on 12/11/15 and 12/22/15 amended the timing of payments but the scheduled closing remains 1/8/16.
  • December 16 and 18, 2015 — $JRJC – News released in China but not the U.S. indicates private investment institutions, led by Windsor Capital, proposed a non-binding offer to take JRJC private at $8.50 per ADS. JRJC’s strong financial results for Q3 2015 released on 12/15/15 support the notice that private institutions would have an interest in taking the company private.  The market also took notice on 12/16/15 by marking JRJC up by nearly 40% to around $6.30.  Windsor confirmed its offer but the company has not yet acknowledged the proposed transaction.

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Top Performing Picks

Picks that GeoInvesting is Particularly Proud Of

  • December 3, 2015 – $ASNB — Shares have risen nearly 70% since we established a speculative position 11/17/15 at $0.17. An investment bank with expertise in the med-tech manufacturing space has been engaged by the company to provide guidance and assess strategic alternatives.  We began our due diligence process 10/19/15.  The company reported revenue growth in fiscal Q1 2016 that nearly doubled revenue reported in Q1 2015. On 11/17/15, Form 10-Q for Q2 2016 was filed showing continued strong performance.  An article detailing ASNB and its business can be found here.
  • December 18, 2015 — $MGPI In keeping with our prudent sell discipline, we began to unwind our long position in MGPI on 12/18/15 as the share price reached a then new high of $24.63, up around 55% since our 8/6/15 alert and easily surpassing our initial price target of $20.77. We initiated our long position on the heels of the company’s strong Q2 2015 results.   We also alerted members when we added to our position on 8/17/15 and 9/8/15 based on open market buys by insiders and the company’s stock buyback announcement.

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GeoBargain Updates

Additions & Subtractions of GeoInvesting’s Best Picks

  • December 4, 2015 — SMITH-MIDLAND CORP (OOTC:SMID) – We alerted members that we took a pre-earnings release position in SMID on 10/26/15, when it was trading at $2.95. On 11/2/15, we published a research note detailing our reasons for optimism.  On 11/3/15, we coded SMID as a GeoBargain.   On 11/12/15, the company reported blow-out Q3 2015 results.  On 12/3/15, SMID’s Board of Directors declared a special dividend of $0.04 per share.  In other positive news for SMID, on 12/3/15, The House passed a $305 billion measure to fund highway and mass-transit projects for the next five years removing year-to-year uncertainty regarding funding from that business sector.  SMID recently traded at $3.32.
  • December 17, 18 and 23, 2015 – $GVP — Coded GVP as a GeoBargain on 12/23/15. We published our reasons for tracking GVP on 12/17/15, including insider buying, activist involvement, restructuring efforts by management and revenue growth.  After the market close on 12/17/15, a 13D was filed by Angeleno Investors disclosing a 5.5% stake and their intention to maintain dialogue with management regarding the company’s operations, strategic direction, capital structure and corporate governance.   Our confidence in this story has grown since speaking with management.  We also believe that the activist investors have the gravitas to help effect a turnaround for the company and its share price.

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