As I review the financials, there seems to be a consistent pattern, that essentially, the company continues operate, yet never makes a profit, but manages to simply Get by quarter after quarter.
As noted in the discussion with Melida, as I see it accounting profit can suggest improvements, yet depending how it is calculated -non cash items can distort the reporting.
After all,
'the big question is -how can you say things are improving when the company still is losing money quarter on quarters,year on year, AND can't survive without financings???
Why is this happening and is it sustainable?
The problem is, the shareholder returns are not there there.
So how is it possible? Also, why would you do it. To me this is what I see:
- Frequent Capital Raises: You make enough revenue to cover some of the operating expenses, and repeatedly raise capital by issuing new shares.Even if you put in your own money, it's worth it if you can issue yourself shares and cash them out. They may not have profitable operations, but they can stay afloat by tapping into investor enthusiasm or potential future success. This dilutes existing shareholders but keeps the company funded. many people don't seem to get dilution.Imagine If you show up at a party, and there's a piece of pizza, and you're entitled to one piece of that pizza and there's 10 pieces, you decide not to have any of that pizza, and you'll come back later to get it when you come back suddenly your pieces been divided in half, that keeps happening and happening before long. You're looking at this little crumb wondering what happened.
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- Incentive Compensation: Insiders can receive compensation packages, including stock options . Even if the company isn’t profitable. If stock prices rise, they can profit by selling shares, and as we’ve seen here, even if they don’t, if you get enough options, you can simply just sell into the market continuously, which is something that seems to happenwith the trust. For some odd reason, people seem to think that the fact that this was pre-set that the trust is going to sell by announcing that means it’s OK. There’s some weird line of thinking, that just because someone tells you they’re going to use your Visa card every month and spend $1000, that’s OK. Guys stop saying it's a sale-they told us they would do it. This setup can incentivize insiders to keep the business going even if returns for common shareholders are lacking. Kind of like that analogy of turning up the water slowly, the frog never gets it, until they're fried.It shows up as negative shareholder equity that keeps growing IMO and other areas. the deterioration of share price from 12 bucks or so to Pennie's, is a good way of keeping track for bag holders who can congratulate themselves for being longs. Another company I pointed out and warned folks abloyr did this called, but at least they gave everyone socks. I nevr\er got a pair, but I bought my own with a growing cash pile by investing in winners.
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- Debt and Other Financing: as I showed in the balance sheet there continues to be deterioration with increasing debt , and growing accounts payable, .. Even if this is not sustainable long-term, it provides liquidity to continue operating. Meanwhile, insiders can draw salaries or bonuses, potentially leaving shareholders with a burden of debt if the business doesn’t turn around. You also have to look at related party transactions, such as getting reimbursed for a building that you might own, or something that you can get the company to pay for.
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- Strategic Accounting: Certain non-cash adjustments (like depreciation, amortization, or stock-based compensation) can make financials look better than they are, concealing the company's true cash flow issues. This can keep investors hopeful and avoid raising red flags while insiders benefit from compensation packages. I didn’t go through all of the costs and how that is the case here, but take a look at the depreciation and amortization.I can do further deconstruction of the fianacilas but there isn't much discussion of it so I left it where it was, as a sad burning heap of going concern
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- Storytelling and Promises of Future Growth: the story is, that you operate at a loss but paint a compelling future narrative, promising high returns in the long term. This narrative can sustain investor interest for years, giving insiders time to benefit, regardless of actual profitability.
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I think that this article that was written at the time of the fraud allegation really summarized it beautifully.
As the Globe and Mail article says succinctly:
“PyroGenesis also says “the operations of the company continue as usual.” Perhaps shareholders should neither take comfort nor be reassured by that. The company has never made an operating profit in a dozen years as a public company, and the shares are down 93 per cent from the February, 2021, highs. The big winner at PyroGenesis, instead, seems to be the Pascali family. At least, for now.”
https://www.theglobeandmail.com/business/commentary/article-pyrogenesis-quebec-regulator-fraud-allegations/?cmpid=rss
All for entertainment, do not invest based on what you read here, don’t believe anything you read here, including what I’m writing, because I’m just learning having fun and learning how to avoid nonprofitable, story stocks that never go anywhere. Well, that’s not true many of them just keep on going down and then bump along for a while, and get a short little run up, and then just go back down to where they were grinding out and existence like the Everready bunny. Rinse and repeat-have fun pyronairres