Biorem Inc V.BRM

Stick and Stones

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The Good, the Bad, and the Ugly (April 2024)

Mathieu Martin

May 01, 2024

 

 

 

Welcome to your monthly recap of the Canadian microcap market.

April was another busy month with several earnings releases, mainly from TSX Venture issuers. It's been quiet on the acquisitions front, as no new transactions were announced this past month. The lack of M&A activity was somewhat surprising given the pace of the last few months, but it's also a welcome relief for us public market investors. Acquisitions are nice in the short term, but I'd rather have more companies thriving in a public market ecosystem for the long term.

As you read this, I am headed to Las Vegas for the Planet MicroCap Showcase (see my preview here if you missed it). I'll write a recap of the event when I'm back in Montreal, so stay tuned for that. Lastly, Rivemont will hold a technology-focused cocktail event on May 14 in Montreal. The event will showcase two public microcaps and a keynote speaker. If you're in Montreal and would like to join us, you can register HERE.

Now, let's look at some of the main highlights from last month!

For those who joined this newsletter recently, the concept is simple. I feature the news that caught my attention during the previous month after skimming through all the press releases on the Canadian market. Every press release, every single day!

The Good

1. Another bullish sign of financing activity surfaced in April. After highlighting a couple of bought deal financings in March, I saw several oversubscribed private placements in April. Private placements tend to be done by smaller companies and typically involve a mix of accredited investors, financial advisors and small funds. When there's too much demand for these small financings, companies tend to increase the size of the offering (oversubscribe) to raise more capital. This is purely driven by strong investor appetite. Ztest Electronics (CSE: ZTE), Simply Solventless Concentrates (TSX-V: HASH), Plurilock Security (TSX-V: PLUR), LSL Pharma Group (TSX-V: LSL), and Simply Better Brands (TSX-V: SBBC) all announced oversubscribed offerings recently. Kraken Robotics (TSX-V: PNG) also announced a bought deal financing last week.

2. The strongest earnings report I've seen came from Biorem (TSX-V: BRM), a cleantech company that sells a comprehensive line of air emissions control systems. For its 2023 fourth quarter, Biorem grew revenue by 12% and net income by 200%. EPS came in at $0.15 for the quarter on a stock trading around $1.50 at the time. Biorem's revenues tend to be lumpy, so I wouldn't expect the company to repeat this strong performance every quarter. That being said, it provides a glimpse into the kind of operating leverage and profitability the company can achieve as it grows revenues.

3. Cematrix (TSX-V: CVX) also reported strong financials with an absolute monster fourth quarter, growing revenues 136% for the quarter and 85% for the full year. That's all organic, by the way. 2023 was the best year in the company's history at $53 million in revenues and $4.9 million in EBITDA. I've been following Cematrix for a long time and witnessed their ups and downs over the years. Things have come together very nicely for Jeff Kendrick and his team lately. Kudos to them!

4. BQE Water (TSX-V: BQE), a service provider specializing in water treatment for the mining industry, reported outstanding financial results for 2023. Revenues were up 49%, Adjusted EBITDA was up 52%, and net income was up 128% compared to the previous year. Based on management's comments, the outlook also seems bright for 2024 and beyond. It's one of the best and most detailed press releases I have seen in a while. Totally worth a read!

The Bad

1. Datametrex AI (TSX-V: DM), a regular feature in my Bad and Ugly sections, made another puzzling move by acquiring a blockchain-based mobile game company six days after its launch. Yes, six days. DM is paying $3.5 million in shares (more dilution!) for what seems like an early-stage, pre-revenue asset. I wonder what could go wrong…

2. Taiga Motors (TSX: TAIG), the Quebec-based manufacturer of electric off-road vehicles, reported fiscal 2023 results along with a gloomy outlook for 2024 and beyond. Given challenging market conditions, Taiga temporarily paused its vehicle production and reduced its workforce by 70 employees. The company will also stop providing guidance, production and sales outlook for 2024 and beyond. The stock sunk over 50% the following day.

3. I highlighted Bettermoo(d) Food (CSE: MOOO) last month due to its suspicious stock promotion activity. The company announced an $8.5 million financing in April (makes sense) at a steep 40% discount to the prevailing share price. It looks like they priced the financing at an absolute low following the failed stock promotion. Go figure… And the nugget in the press release is that a company controlled by the CFO will earn a 2% commission (in shares) on the financing for administrative services. That's $170,000 worth of shares if the financing is fully subscribed. Can someone remind me why a CFO isn't already supposed to handle a financing as part of his regular duties?

The Ugly

1. I highlighted Spectra7 (TSX-V: SEV) a few months ago because the company missed its fourth-quarter guidance by a mile. On April 15, Spectra7 announced that its first quarter 2024 revenues would be down over 75% from the year-ago period and that it would run out of cash within the next two weeks. Investors ran for the exits, and the stock imploded, losing over 80% the next day.

2. Ok, here's a wild one. In early April, AnalytixInsight (TSX-V: ALY) issued a press release detailing an internal investigation by legal counsel on serious corporate governance issues. The five-person board was divided on the issue (presumably because some directors were part of the investigation). Then, three directors convened another board meeting to fire the other two board members, the company's legal counsel, and the CEO. Meanwhile, the legal counsel and the CEO issued press releases on behalf of the company to dispute the claims. The company issued a string of press releases from both sides during the month. The stock was halted for some time, and financial results will be filed late due to this situation. These issues are ongoing, and it’s still unclear who remains on the board and who’s running the business.