Ahh, yes, the controversial zero star review from last December. And since the stock finished second in two “Who should I review next?” polls in the Wolf Den discord last week, they get this special Labour Day weekend review before I jet (drive) away on vacation.

It is possible that I have forgotten a couple, but I believe Purebread is only the seventh company ever to receive a zero star review. I reserve the zero star reviews for whom I think will not survive another 12-18 months.

All previous six are either out of business, or went though very long cease trade order processes. SPO, AH, TBP and EPW have all been dead for sometime. VSBY was under a CTO for nearly two years, made a brief reappearance and is under a CTO once again. FOBI fell under a CTO for 21 months and just started trading again last month. I predict that will not last much longer.

While the list is relatively small for those whom receive that lowly distinction, there have been much more that have come extremely close with ratings of .5 or even .25 of one star.

• Flow Beverage (FLOW.N) once traded on the TSX at $8, and now trades on the lowly NEO at 4.5 cents

  

• Odd Burger (ODD.V) received a 1/4 star review in April of 2024 and ceased trading this February

  

• Else Nutrition (ELSE.C) once traded on the TSX at the equivalent of $290. It has recently moved to the CSE and trades at 10.5 cents with a $650,000 market cap.

• NorthStar Gaming ($BET.V) originally received a one star review at ten cents back in November of 2023 which was downgraded to 1/2 star in May of 2024. It ceased trading in May at a penny

  

• American Aires ($WIFI.C) originally received a one star rating in June 2024 at 93 cents, was downgraded five months later to 3/4 star. They ceased trading in May at 3 cents

• Verses AI ($VERS.N) with taking multiple reverse splits into consideration once traded at $100. It first received a 1 star rating in October of 2022. It was downgraded to 1/2 star in Feb 2023 and received multiple similar reviews thereafter. They ceased trading in June

  

• Voxtur ($VXTR.V) received a 1/2 star review in December of 2022. It once traded at $1.35 on the TSXV. It now trades on the OTC at $0.000001 (that’s not a typo)

  

• Origin Foods ($OG.V) received a one star review in May of 2022 and was later downgraded. It once traded at today’s equivalent of around 72 cents. They ceased trading on the TSX Venture in Jan of 2023, and now also on the OTC at $0.000001

• Eguana Technologies (EGT.V) received a one star review in Jan of 2022 when it traded at $4.25. They are under a cease trade order since May of this year when they traded at 8.5 cents

• Boosh Plant Based Brands ($VEGI.C) received a one star review in March of 2023 when it traded around $0.09. They stopped trading at a half cent eighteen months later in August of 2024.

  

The Hate:

While I have over 5300 followers on Substack, I often wonder if I would have an equal or greater amount of detractors if their was a dislike button. Bulls, particularly in the Canadian microcap space can be a sensitive bunch. I get it. Nobody likes to hear their baby is ugly.

Occasionally, when I give a stock a very poor rating there are those who wish to have a real debate on my reviews. But much more often that not, I receive an extreme amount of vitriol. I’d prefer the former, but I will not shy away if you choose the latter.

Here are some of the comments I’ve received over the years. Rather than screenshot to shield the the nameless, I’ll just quote what was said:

(note - these comments were directed at one of me or my reviews and they are ALL from stocks who went on to have a CTO or went bankrupt)

“I give your review a zero star” (easing into it)

“I think we can stop wasting oxygen on these people. They will anyway lose all their money in stock market. God give me the confidence of @wOLFofOakville to publish something like this without the fear of being judged. I have only one sincere advice for people like these: ‘It’s better to stay silent and be thought a fool rather than speak up and remove all doubt’”

(that one was on my birthday and might be my favourite). This particular user was last seen in August of 2023.

“Listen here you goofy prick, any accountant who has self appointed himself a wolf from Oakville is some soft pussy bitch boy.”

“Wolf, you're a poor representative of Canada”

“He huffs and he puffs and couldn't blow the house down. Poor ftard wolf missed the train.”

“Who are you going to listen to… the chief AI officer at Lockheed Martin or a person who takes a magnifying glass to a small cap’s financials when the company hasn’t even launched their product yet? You take a magnifying glass and miss the bigger picture. Get outta here.”

“The big bad Wolf is here Oh My. Take a flying leap and spare the world”

Wolf your evaluation is comical at best. Goodluck to you, your going to need it with insight like that.

Same user, two years later:

“No one could have foreseen this... expect maybe @WOLFofOakville”

“Who cares about your one star rating on this board Wolf ?”

“Hey little wolf, are you still short?”

“Wolf. Cannot wait to see you reluctantly give a one star , followed by a two star… and eventually a three….. gonna be worth while to see how neutral and objective your analysis actually is. I’ll see by the end of the year if we can’t get that star.”

“I have seen newbs like wolf come and go over the last 17 years, he is young and new to ceo full of piss & vinegar will be surprised if he is still around in a few years.”

I could go on (and on) and I probably missed some fantastic ones, but I think you get the idea.

If you missed last December’s zero star review, I’ve included it below.

That “bagel” was not my first review of Purebread. That occurred back in March of 2024 when the company was known as Coho Collective Kitchens under the ticker COHO. They did a 5:1 reverse split since then so it traded at an equivalent of $0.82 at the time of the review. By October of 2025 the stock price had dropped by 96%.

It was up to $0.12 when I reviewed it back in December, and reached as high as $0.30 just after the announcement of new leadership and debt rearrangements were made (discussed later). My BRED haters, (the same ones who still hold $0.70-$0.80 pre split COHO shares) performed some touchdown celebrations before they even hit the red zone. It’s down 50% since, but in fairness, it is also up 25% since the zilch review from December. Perhaps more surprising, many of the BRED haters were invested in at least three of the above mentioned tickers too.

You can lead a horse to water, but…

So why have I decided to take this trip down memory lane?

Two reasons actually, and the first is relatively obvious. Yes, once again I’ve had some hate directed towards me for my last review on PureBread. The second is to point out the rationale I have when deciding whether or not to give a stock a zero, or perhaps a 1 star or something in between.

NorthStar Gaming, Verses AI, and Else Nutrition were all reviews that could have easily fell into the “Zero Star” category. The primary reason they did not was funding. There were several people willing to throw good money after bad in those cases. I eluded to this in one of my reviews on Verses.

Northstar Gaming had Playtech PLC as a strategic investor, and Else Nutrition had multiple ones over the years too.

How does all of this relate to Purebread? Back in March the company announced leadership changes including a group that assumed some of the company’s debt - a very important one with BMO as their was a risk the bank was going to force bankruptcy proceedings. The company also made several other arrangements with other parties in debt for share transactions.

BRED has introduced what some retail shareholders have referred to as new “smart” money. I can assure you retail shareholders said similar things about smart money funneling into VERS, BET and BABY also (oddly, some are the same people).

But does this introduction of new investors with deep pockets change the company in a significant enough way to avoid an inevitable collapse like the sixteen examples I provided above?

For starters I do believe it will most certainly lengthen their survival beyond the 12-18 month “death” that my zero star review predicted back in December of last year. Does that mean it’s upgrade worthy?

Let’s find out.

Balance Sheet:

When I last reviewed BRED, they had the worst ever current ratio that I have ever formally reviewed at a microscopic .02. That meant for ever one dollar in current assets they held, they had $50 in liabilities due over the next twelve months.

Nine months later that ratio has improved to .05 - making it now the second worst current ratio I’ve looked at in one of my reviews. As of June 30th the company had $550k in cash, $47k in receivables, $200k worth of inventory and $120k in prepaid expenses over top of $17.7M in liabilities due over the next twelve months. Daunting no matter how you look at it.

That liability number was over $23M nine months earlier. $2.13M of non cash burning convertible debt was converted into shares. Approximately a dozen “other loans” as classified on the balance sheet were extinguished in some fashion - many of which received stock at well above market prices.

Post financials the $5.2M term facility originally held by BMO was partially settled ($3M) through 20M new common shares at the current share price of $0.15 and 10M warrants at 30 cents with a two year expiry, along with some interest forgiven. This should leave about $2.2M.

Let’s assume for the $1.8M in “other loans” and the $2.2M remaining on the original term facility will also not result in funds leaving the company in the next twelve months - there is a good chance these could also be converted into shares or have the can kicked down the road. What would remain is the $1.1M in lease obligations and $8.5M in accounts payable (About $200k is due to previous employees for unpaid salaries). That leaves roughly $9.5M in cash needs over their next twelve months. Currently, they only have less than $600k in liquid assets to fulfill those obligations.

Have they made some progress? Surely, they have. But even after all of that debt settlement, Purebread still maintains one of, if not still the worst balance sheets I’ve ever looked at. Let’s also remember this includes a $1.9M private placement in mid April. Two thirds of that is already gone.

That $8.7M in payables is about $200k less than what it was nine months ago. What probably makes up that amount are typical vendors that a bakery or small business would have - ingredients and raw materials, beverage and complimentary suppliers, cleaning and kitchen essentials, etc. Those groups are not taking over market shares for what they are owed. Those who hold their leases are not taking over market shares for what they are owed.

So how can a company like Purebread make up that difference between the $600k in liquid assets they have and the roughly 15x that amount they have scheduled to go out the door in the next year?

The main two ways would be to raise capital through additional debt or dilutive means. The other would be by generating positive cash flow.

Cash Flow:

So much for the latter as BRED has burned through $233k of operational cash flow through their quarter of 2026. This compares to generating $542k in positive flow during the same period a year ago. Part of the reason for this variance is negative working capital adjustments for reducing their payables from the start of the year.

In actuality, they are probably very close to cash flow neutral via their operations. But even with that, neutral operational cash flow does not put a dent into the massive working capital shortage.

In the rest of the cash flow statement, they spent $47k for equipment, reduced their debt by a net $750k, and raised nearly $1.9M through their April PP.

They did end the quarter with 4x more cash than they started with. That still only amounts to $550k and it involved a $1.9M raise to accomplish.

Share Capital:

• As of today, 63.8M shares outstanding - 175% dilution in the last five quarters when it was 23.2M shares

• 24.2M warrants outstanding, all out of the money. 17.3M at 30 cents are the cheapest

• 389k out of the money options and 311k RSUs

• Prior to the $3M loan settlement, insider ownership was listed as high as 2.4% (SimplyWallSt). Post settlement including three new listed insiders it is way up to approximately 35%

• No significant insider activity in the open market

Income Statement:

Purebread starts the year with a 7.7% decline in revenue from $3.63M to $3.35M. The decrease in revenue is primarily attributable to a store closure at the beginning of Q1. The company did not state comp sales for their remaining stores. In fact, they did not issue a press release accompanying these financials.

Gross margins declined by 110 basis points but is still a healthy 64.4%.

Total operating costs rose by 3.2%. If interest costs were removed, the rest of their operating expenses rose by 34% on down revenue and gross margin. A portion of that was audit fees which were recorded in a different quarter last year. But comparable operating costs like payroll was up 13%, and office and miscellaneous rose by 214%. Occupancy costs also rose by 26% and Subcontractor costs by 67%

That is easily a reverse Wolf Trifecta. Lower sales, lower margins and not only a lack of any operational leverage, but much higher operational spending.

The end result is a $323k operating loss, about 12x worse than the comparable quarter. Tack on another $152k for a loss resulting from extinguishing a portion of their debt, that loss grows to $476k, more than 17x worse than last year.

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Summary:

Most readers of this and my previous reviews may think that I have some difficulty with the actual business model of their bakery’s. That actually isn’t true. Their stores are very well presented, merchandised, and they have excellent reviews from customers in the 4.5 - 4.7 star range on Google and TripAdvisor.

Even their financials provide a potential glimpse into what could be as they are relatively close to break even and appears they could be within striking distance of generating regular positive operational cash flow.

The problem is the giant anvil they have dangling around their necks in working capital deficiencies. That problem goes back to other segments of their business and previous leadership, which would require a whole other article to explain to point the proper blame on the proper people.

In almost all of the sixteen examples of companies who went tits up after I gave them a poor review, their overall business model was broken for one reason or another. They may have had a good product (ELSE/VEGI/OG), but something else was fundamentally broken such as their gross margin model (EGT/ELSE again).

Despite my bearishness, I cannot cite the same thing here. Unlike the other sixteen, this is a little unique. One thing BRED has in compared to the other sixteen at any time of one of my reviews is a balance sheet that is worse than ANY of them. That is even taking into account the recent shares for debt, and loan obligations changing into friendlier hands.

When I reviewed BRED last December it traded at a $3.2M market cap. Today, it’s triple that at $9.6M. The stock price is up 25% showing once again the negative power of dilution.

A month ago the company put out a news release stating:

“Purebread currently operates 7 corporate locations generating approximately $14 million in run-rate revenue, with a clear path to scale supported by a commissary production model built for growth. The Company’s long-term plan targets 30 locations and $75 million-plus in revenue within 3 to 5 years, and 100 locations with $250 million-plus in revenue within 10 years, positioning Purebread as Canada’s first national premium artisan bakery brand.”

Bold statement when you only have enough cash to pay six months of current lease costs and nothing else. Clear path? I’m not sure what dressing to put on that word salad.

Now, what shall I do about a rating here? We are halfway through the top end of my 12-18 month timeline where my zero star review typically projects the company will cease to trade or cease to exist all together. The developments since that review strongly suggest that is no longer very likely. I don’t understand their thinking either. The group that did step forward with cash could have allowed the bankruptcy to proceed and then picked up the brand and assets for much cheaper.

I feel that these new group of investors are throwing good money after bad, as was the case with NorthStar Gaming, Else Nutrition and Verses AI. Just as was the case with those three failed companies, I don’t think it’s worth a retail investment either. The risk/reward formula doesn’t exist here.

0.25 stars. An upgrade. May the hate ensue.

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Disclaimer:

My intent is for my reviews to be a bolt on to due diligence that you have already completed. I receive dozens of review requests a week, therefore my own DD may be great or none whatsoever. Unless otherwise stated or implied, my opinions are on the financial performance of the company based on their most recent filings. I conduct these reviews to assist other retail investors whose research skills are limited when it comes to reviewing financial statements. I do not accept compensation of any kind from companies I review.

Wolf FINS Reviews are intended to be informational and are based on personal opinion. They are not intended to be financial advice, and all readers are encouraged to perform their own due diligence prior to their investment decisions, including discussions with their investment advisor.

I didn’t have Snipp Interactive on the bingo card to review, but I conducted another poll in the Wolf Den discord, and Snipp came out on top with 42% of the vote beating out BRED and CHER.

Snipp Interactive, is a global loyalty and promotions company, which focuses on developing marketing engagement platforms that generate insights and drive sales. They are not the DIY vasectomy and organization that their name might imply.

My last review of Snipp was back in June of last year after their first quarter. While it received an upgrade to 2.75 stars achieving a Wolf Trifecta of double digit revenue gains, margin improvement and operational leverage, I was not a big fan of management. A history of late filings, trading halts, and a bloated C suite with a retail unfriendly SBC plan whom rewarded options in almost generous manner. The fact they went with SPN over SNP or something else I find highly disturbing too.

Other than that I loved them.

The stock is down 40% since those financials five quarters ago, proving questions in leadership trumps a Wolf Trifecta

The stock currently sits at 4 cents, and has touched all time lows of 3.5 on a handful of instances this year. Their financials released last week haven’t moved the needle one way or another. The company has delivered $30M (CAD) in TTM revenue yet are priced at an $11M market cap for a .34 P/S ratio.

That usually suggests some issues. Let’s find out what they are, or if the market is getting it wrong.

(Amounts in USD unless otherwise stated)

Balance Sheet:

If you just looked at Snipp’s current ratio it wouldn’t be pleasant. But 70% of their current liabilities are made up of deferred revenue, and to better measure for liquidity, that needs to be adjusted for. A standard method of doing so is to remove that from their one year financials commitments. Therefore their Adjusted current ratio is a very healthy 3.4, which is a slight improvement from when they were last reviewed in June of 2025.

They have $6.2M in cash, $3.1M in receivables and $1.5M in other current assets over just $3.2M in liability commitments over the next twelve months.

Snipp does not provide a typical aging report but does note they have $112k over 90 days. That’s just under 4% which isn’t overly concerning but I’d still like to have more detail. Note, that they do have some customer concentration with just three customers making up half of their A/R and potentially their whole business.

The company’s only debt is comprised of $2.67M of convertible debentures which were issued this February. They bear interest at 3.45% for 36 months with quarterly interest. They have multiple conversion prices depending on date exercised. Eight cents by Feb 2027 and ten cents thereafter. Given the current stock price of four cents, early redemption appears unlikely. A full 12 cent warrant was issued with each.

Cash Flow:

Halfway through the year, Snipp generated $556k of operational cash flow, 6% higher than last year. There is quite a bit of working capital adjustments in both years. While not concerning, I’m going to suggest their OCF as presented is slightly better than actuality.

They received an initial $3.2M from convertible debentures earlier in the year and spent $728k in software platform development.

Overall their cash position is up 85% from the start of the year thanks to the debenture offering.

Share Capital:

• 287.1M shares outstanding with only 1M shares in dilution since I last reviewed them

• 31.4M options outstanding. during the 1M were exercised (5 cents), 640k were cancelled and another 4M expired worthless. None of the remaining options are ITM.

• 56.25M shares would convert at 8 cents (CAD) and another 56.25M warrants at 12 cents (CAD) in potential dilution related to the February convertible debentures. Yikes.

• 2.1M options awarded post financials at ten cents

• 30% insider ownership. No recent insider activity on the open market but there was in the debenture raise

Income Statement:

After back to back dreadful quarters on the revenue line, Snipp was able to get back into the green in a big way in Q2 with a 25% improvement on the top line to $6M vs $4.8M.

SPN uses Campaign Infrastructure as their COGS to calculate their gross margin as they cite in their news release.

Unlike most of the civilized worth however, the company chooses not to show that line in their financial statement. Margin improved by 360 basis points as they note and that helped to drive an additional 33% of gross profit dollars.

Cash burning operational expenses declined by an impressive 14%, mainly driven by an 18% reduction in payroll expenses. Therefore in back to back reviews, they are awarded once again with a Wolf Trifecta quarter.

Unfortunately, all of that improvement still resulted in a $187k net loss in Q2. That is a heck of improvement over the $1.7M loss from a year ago however.

On a YTD basis, that 25% growth in Q2 wasn’t quite enough to get them back to flat through six months, so they remain 1.5% down on that metric. Margin is up by 60 basis points to 57.2% and that nearly got them back to flat in terms of gross profit dollars. Their improvement in cash burning expenses continues with nearly 11% savings, driven once again by payroll costs which are down 12%.

That translates to a 54% improvement in their net losses, from $1.88M last year down to $875k at their midway point of 2026.

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Summary:

In the introduction I mention they have achieved $30M (CAD) in revenue on a TTM basis. That figure is less than they achieved in any of their last full four years. In each of those full years, they lost anywhere between 4% and 11% of revenue on the bottom line. So far YTD in 2026, revenue is a little worse than flat and they have lost 8% on the bottom line.

So if your sensing my lack of enthusiasm, you’d be bang on.

If you read their press releases from a couple of years ago, you’d see many of the same bullet points. Revenue were up or down “x”, margins up and down “y” and backlog equals “z”. Backlog was $19M here but it was $17M two years ago in Q2 and their revenue has been lumpier than a bad bowl of oatmeal. So why should I get excited now?

The last thing I’ll discuss is their float. I felt it was getting bloated last year and in fairness they have only added a million shares since my last review. But this latest debenture raise causes a couple of other problems.

If the convertible debentures fully convert within the next few years, that’s an additional 40% dilution which would put the share count over 400M outstanding. That would mean the share price would be at or above 12 cents which would put more 23M options ITM bringing it closer to 425M.

While these debentures were done well above market at the time, I think they have created some massive overhang here if the share price ever does approach 8 cents again.

Solid quarter, but they have had them before too. If they can string two or three more together then maybe they’ll be worth some discussion.

As for now, I’d opt for that DIY vasectomy over taking a position of Snipp Interactive.

Downgrading to 2.25 stars.

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Disclaimer:

My intent is for my reviews to be a bolt on to due diligence that you have already completed. I receive dozens of review requests a week, therefore my own DD may be great or none whatsoever. Unless otherwise stated or implied, my opinions are on the financial performance of the company based on their most recent filings. I conduct these reviews to assist other retail investors whose research skills are limited when it comes to reviewing financial statements. I do not accept compensation of any kind from company’s I review.

Wolf FINS Reviews are intended to be informational and are based on personal opinion. They are not intended to be financial advice, and all readers are encouraged to perform their own due diligence prior to their investment decisions, including discussions with their investment advisor.

This review is the result of another poll from the Wolf Den discord. Users had a choice between MYID, SPN and CHER. With 45% of the vote, we will be reviewing Reklaim Ltd.

I initially thought that this would be my first coverage of the company. It turns out that isn’t true. I rewarded them with a mediocre 2.75 star review two and a half years ago. Sometimes when you review so many stocks, you’ll forget some and to be honest, back then they weren’t exactly memorable.

The review was completed prior to moving to Substack, but I moved it over from the archive and can be viewed below for comparison purposes.

Investors appear to have liked these financials very much, sending the stock up by 64% since their release to 19 cents to a $24M market cap valuation. That is a 89% gain over the past year but 500% from their lowly lows of just 3 cents back in March.

When I reviewed the stock nearly thirty months ago, it was in the 14 cent range at a $16M market cap, so if you were a MYID shareholder for all of that time, you were likely in the red until last week.

Reklaim has an interesting and unique business model - they allow consumers to opt-in to share specific pieces of data with brands, agencies, and companies in exchange for compensation from the use of their personal data.

For a quick way to best understand what Reklaim does, I’ve attached a 7 minute YouTube video below that may explain it the best.

Keir from TokStocks has also covered the company, and you can find CEO interviews from his Substack.

Let’s get into it and see if MYID is worthy of this recent bounce, and how that old Toyota Camry is holding up.

(Free release on Wednesday Sept 9th)

Balance Sheet:

Reklaim has a pretty solid looking current ratio of 2.6 that consists of $1M in cash, $1.5M in receivables and $120k in other short term assets against just $1M of liabilities due over the next twelve months.

The good news is their cash position offsets all of their one year financial commitments which include a small $65k loan at 5.3% which matures at the end of this year.

When a company’s A/R makes up more than half of the company’s total assets, never mind just current, it’s worth checking the aging report. I’m happy to report that they look excellent. While their 60-90 typical terms aren’t the best for a small organizations cash flow, the A/R and history of write offs look quite good.

In terms of other debt, they have $455k in debentures as 12 points converting at 10.5 cents with an expiry of Oct 2028.

Pretty clean and no issues here. Those couple of PC’s and that aging Toyota Camry must have a lot of clicks on it now as they only have $15k in long term assets ($23k when I last looked at them in the Spring of 2024).

Cash Flow:

Pretty solid six month cash flow numbers for a company with just $2.6M in total assets. Through the first half of their fiscal year they generated $850k of operational cash flow. That number includes burning $220k in Q1 meaning they generated nearly $1.1M in this recent quarter.

The $850k of OCF thus far compares to burning $43k at this stage last year, so the last couple of quarters have been quite a turnaround for the business.

Reklaim is also buying back stock, $321k worth so far this year.

No investing activities in the past couple of years. That Camry is still running strong.

Share Capital:

• 124.4M shares outstanding, 6.1M shares less than the beginning of the year through their aggressive buy back strategy

• 2.4M warrants all related to their debentures, all ITM at 14 cents. 3.2M also expired at that price earlier this year

• 8.3M options outstanding, all but 125k are currently ITM. 3.6M granted YTD

• 1.75M RSU’s outstanding, with 1.1M granted YTD

• 4.3M in shares scheduled to convert in Oct 2028 or earlier (not including interest)

• 30% insider ownership (per Yahoo Finance), the majority of which held by the CEO

• No insider activity in the last twelve months

After ripping on them pretty good a couple of years ago for their bloating float (it had diluted by 83% over the past two years back then), they have done a better job of it since. The aggressive buybacks are notable at 6.1M shares just through their first six months. What is also worth pointing out is they have awarded 4.7M in stock options and RSU’s in that same time frame under their 10% rolling plan. In fairness, much of their previous year awards have expired worthless in terms of stock options. It appears they are giving themselves back a little something here, and perhaps that is deserved given their improved performance.

Their fully diluted float including ITM securities is around 141M giving them an implied market cap of about $25.4M

Income Statement:

A heck of a start when you can throw down a triple digit increase over last year. Revenue in the quarter of $2.63M, a 103% increase over the $1.3M achieved in the comparable quarter. A slight 50 basis point hit in their margin rate, but who is going to complain at 76.6%? Gross profit dollars increased 102%.

Maybe most impressive is this was done with only 6.2% increased operational spending. Given there is little depreciation or amortization involved with their two Commodore 64’s and 1994 Toyota Camry on the balance sheet, we can safely assume these are all cash burning aside from their SBC costs.

Jokes aside, and even given the minor decrease in margin rate, this is worthy of a Wolf Trifecta quarter.

That small 6.2% increase in expenses amount to $77k. Therefore the difference of their $1.02M in GP dollars less that equals a $960k turnaround in profitability. $723k vs a $223k net loss last year. Their revenue was also up 46% sequentially and net income by 98%.

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Summary:

In short, this is a hell of a much better company fundamentally than I looked at back in April of 2024. It also very much appears they are deserving of their recent large bounce since earnings. I don’t say that often and quite frankly I wasn’t expecting to say that about Reklaim.

Where they go from here and how to properly value them presents some different challenges however.

On a TTM basis, they look very expensive, a 49 P/E, a 39 EV/EBITDA ration and at 108x cash flows.

Extrapolating their current YTD performance paints a different picture. That potentially looks on the cheaper side at a 10.7 P/E, a similar EV/EBITDA and 14x cash flow. If you wanted to extrapolate the quarter (I won’t because that’s silly) it gets cheaper still.

The question is where do they go from here? I wish I had a better feel as to how lumpy their revenue might be. In Q4 of 2023 they achieved $1.42M and it took them three quarters to best that. In Q4 of 2024 they achieved $1.76M and then took them FIVE quarters to surpass that.

They launched a consumer facing subscription service last year which drives some recurring revenue, but I can’t find any data on how big a portion of that makes up their total revenue. My guess is if it was fairly significant, they would be shouting it at us.

That certainly seems to be Reklaim’s style though. Not much in terms of news releases or keeping retail investors apprised on a regular basis. For longs that can be a frustrating experience, so if you’re thinking about taking a swing here, keep that in mind.

But despite some of the lumpiness, the business is growing fairly consistently overall. It’s hard to envision a scenario where consumer will want less control of the data so I think their product will only continue to attract new people. The next two upcoming quarters present another opportunity as well. Q3 is the softest revenue performance of their last nine quarters AND their worst on the profitability line almost as far back as you can look. Q4 isn’t much stronger comp wise so there is a huge opportunity for them to finish out the year strong.

Buying at 52 week highs can be an uncomfortable experience in the microcap world. But I did just that today with a starter position. Maybe it’s a long swing into their annual financials next year, maybe a longer term hold. We’ll see.

Big upgrade to four stars. I just love myself a comfortable old Camry.

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Disclaimer:

My intent is for my reviews to be a bolt on to due diligence that you have already completed. I receive dozens of review requests a week, therefore my own DD may be great or none whatsoever. Unless otherwise stated or implied, my opinions are on the financial performance of the company based on their most recent filings. I conduct these reviews to assist other retail investors whose research skills are limited when it comes to reviewing financial statements. I do not accept compensation of any kind from company’s I review.

Wolf FINS Reviews are intended to be informational and are based on personal opinion. They are not intended to be financial advice, and all readers are encouraged to perform their own due diligence prior to their investment decisions, including discussions with their investment advisor.

Fins just dropped and at a first glance there looked like there could be something here. Market approves, up 11.1% so far this morning, but let’s see if this gets my approval as well.

Balance Sheet:

An ok current ratio just shy of 1.2 that consists of $164k in cash, $1.2M of receivables against $1.23M in liabilities due over the next year. Not mind blowingly impressive, but what I am impressed by is the one year turnaround of the state of their overall balance sheet. One year ago, their balance sheet could be described as dogshit with a current ratio of just .43 and negative shareholder equity of over $2.5M. They don’t have much in non-current assets, $23k which could be a couple of PC’s and a depreciated Toyota Camry, but the negative equity was reduced by $1.9M. I wouldn’t call their current balance sheet fantastic, but I’d no longer refer to it as dogshit either. They have $888k in long term secured debentures - secured against their A/R I would assume and those debentures were significantly reduced in 2023 as well. We’ll look at these debentures more in the share capital section.

Cash Flow:

Operational cash flow generated in 2023 was $58k on the positive side of the ledger after a significant $3.33M operational burn the year prior. This years number includes a hit of $1.4M in working capital adjustments. Almost half of these adjustments come from increases in accounts receivables and the other, a big reduction in payables. About 20% of the companies A/R is overdue and they wrote of $166k in 2023 and anticipate taking another $43 in credit losses this year. Combined that’s about 5% of revenue which can make a big difference on the bottom line. Their A/R aging is certainly something to look at going forward. Reklaim’s A/P also decreased by $800k, but $620k of that was through issuance of shares to settle that A/P. Another deep dive for the share capital section.

Share Capital:

• 114.4M shares outstanding with 23% dilution in the past year and 83% over the last two

• 26.2M warrants, all at a dime and ITM. This will raise $2.6M to the treasury in the next two years but is another 23% dilutionary measure in the future

• 9.3M options outstanding, again all ITM, so we’re now up to 31% nearly guaranteed dilution between options and warrants

• 117k RSU’s issued during 2023. It’s a minor amount but RSU’s given where the company is at is questionable

• That $620k of payables reduction was settled for issuance of 17.25M at an average of 3.6 cents a share. Pretty good looking deal for the debtors in hindsight.

• CEO contributed 30% towards those debentures and received 8.33M shares in addition to “bonus shares”.

• Those debentures carry an interest rate of 12% and the remaining balance would result in another 6.6M shares at yesterday’s close and that’s prior to future interest.

• 35% insider ownership per company investor deck

• Only 1 open market buy in the previous year by insiders

• Company completed a 5:1 reverse split in 2021 under their previous name, Killi Ltd.

Income Statement:

Revenue was strong with a 74% revenue increase to $4.11M. A dramatic turn of events within their gross profit going from a negative 5.5% GP to an extremely sexy 77.3%. The COGS breakdown is bizarre. The fact that they reduced their hosting fees to $90k is great, but what moron in procurement figured $1.7M was ok to sign off on in 2022 and are they still with the organization? The MD&A doesn’t tell us much.

In addition to reducing their COGS by 62% on 74% growth, they also reduced operating expenses by 38%. Tack on a one time gain of $446k related to their complicated A/P story and that drove a net income of $910k, a earth shattering $5M turnaround compared to the $4.15M they lost in 2022.

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Overall:

A tremendous turnaround in a lot of areas, but it’s clouded by a clusterfuck of a float that has diluted by 83% in two years and set to go up by another 37% when you include warrants, options and debenture conversions. This from a company who reverse split three years ago this month, so that doesn’t give me confidence in managing this much better going forward. Their net income isn’t as good as it looks as half is made up of a one time gain. With that said, it’s still 11% of revenue and you can’t diminish the turnaround from that gag inducing 2022. They’re now up to a $16M MC, so they’re at 4x revenues and a 22x EV/EBITDA when you take that one time gain out, so the bargain that once was doesn’t seem to be there anymore IMO. Congrats if you’ve been swinging this, but I don’t see a lot of rope left here, as it’s already trading on some futures.

2.75 initial stars

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Disclaimer:

My intent is for my reviews to be a bolt on to due diligence that you have already completed. I receive dozens of review requests a week, therefore my own DD may be great or none whatsoever. Unless otherwise stated or implied, my opinions are on the financial performance of the company based on their most recent filings. I conduct these reviews to assist other retail investors whose research skills are limited when it comes to reviewing financial statements. I do not accept compensation of any kind from company’s I review.

Wolf FINS Reviews are intended to be informational and are based on personal opinion. They are not intended to be financial advice, and all readers are encouraged to perform their own due diligence prior to their investment decisions, including discussions with their investment advisor.

Well, I’ve been looking forward to these financials as much as one looks forward to a colonoscopy from a gastroenterologist who’s got the shakes. The fact this is my sixth review in seven days has played a factor as well.

I first began talking about ZoomD just prior to their Q3 results in 2024 when they were at $0.49. They later became a 2025 Wolf Pick and by October of last year, rose to $2.75.

It’s been a complete round trip down since closing last Friday at $0.50.

If there is good news coming into these financials released this morning, it’s that expectations couldn’t be lower after revenue declines of 51% and 64% in their last two quarters. In my recent August WWW article, I had this to say about these earnings:

With expectations almost as low as possible for these results, how did they shape up?

(All amounts in USD unless otherwise stated)

Balance Sheet:

Despite all of their problems, ZoomD continues to sport one of the best balance sheets on the Venture with a current and quick ratio of 4.3. That consists of $22.6M in cash, $6.5M of receivables and $400k in prepaids overtop of just $6.8M in current liabilities.

I do have to pause here to recognize something. When I reviewed their first quarter it was part of a large “Mother of All Reviews” when I was catching up from vacation. What I didn’t notice last quarter was their revamped MD&A. Not only is it more visually pleasing with easier to read tables, but the company also added some additional disclosures - like one of my favourite talking points, aging reports.

A/R looks relatively good, but anything looks good after reviewing NCI last week. You will notice what happens with their expected reliability of accounts that age over 90 days. 83% of their A/R is current.

ZoomD carries no debt. Zero surprises so far.

Cash Flow:

This is a little gross. The company is basically cash flow neutral through their first half after generating nearly $9M in OCF last year. For the quarter, they burned $500k and you haven’t been able to say operational burn and ZOMD in the same sentence in three years.

I think we can give them a pass on the one quarter miss however. Prior to working capital changes they still generated $1.2M in positive OCF. Due to a big increase in receivables and negative impact of forex, took them to their cash burn situation. Given the decent state of their receivables, it’s very likely their best month of the quarter was June, which coincided with most of the quarters billings.

Outside of $45k used YTD on share buy backs and the forex impact, not much has occurred elsewhere on the cash flow statement.

Overall, their cash position is 2.5% more than they started the year with.

Share Capital:

• 101.2M shares outstanding, 2% dilution in the past year

• 131k shares bought back YTD

• 3.05M options outstanding, all ITM

• Approx 15% insider ownership (per Yahoo Finance)

• No insider activity on the open market

The last bullet may be the saddest statement here. After this monumental drop in share price, nobody is reaching into their own pockets. Adding insult to injury, the company awarded 1.28M options and 1.25M RSU’s a week after this quarter. Not a great look IMO, particularly the RSU’s.

The company slightly ramped up the NCIB in July and we have yet so see the August numbers which could come out at any minute. It still feels like a game of “just the tip to see how it feels” though. It feels damn good. Give’r.

Income Statement:

Here is where things continue to go dramatically south. Revenues were down 61% from $19.6M to $7.7M in the quarter following the trend of their last two quarterly performances. Margin stabilized after a dip last quarter and increased by 30 basis points over last year, but that still resulted in total gross profit dollars being down by over 60% as well.

You can say a lot of negative things about management over the last year, but one thing you cannot accuse them of is being poor operationally. Expenses were down 7.3% and that helped secure some profitability on the operating line of $450k (down 91%).

Net finance income due to their cash position was $780k, which more profitability than the rest of their business generated. This helped drive $1.23M of net income vs $6.1M last year.

YTD numbers mirror much of what transpired in Q2. Their Q2 metrics were slightly better which pulled them out of the profitability hole from Q1.

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Summary:

So, for the third straight quarter the income statement was equivalent to a swift kick to the gonads. The difference this time around is we were all wearing our cups.

The conference call may have offered up some more clarity on their historical two largest customers. Finally investors get the news that one appears gone for good, and the other was suggested to be coming back in a big way. Once bitten, twice shy, but I guess I’ll believe it when I see it.

Looking forward, ZOMD longs have one more painful quarter to ensure. Their Q3 ends in a month and we’ll get a chance to see those results at the end of November. For retail investors mental health and to be more rational, until we get to their Q4 I feel we should be looking at their performance on a QoQ basis. And there was some glimmer of improvements when you compare their Q2 with Q1.

Pegging a potential valuation is a tough ask today. The market is pricing them currently around $50M CAD market cap with $31M of cash in the bank and no debt. Despite their woes on the top line to last year, they still remain relatively cash flow positive and profitable.

But if you were to price them based on their last three quarter using a P/E, cash flow or EV/EBITDA metric, they would look expensive. You also have to account for managements communication surrounding the drama of their two largest customers. To be kind to them, it was not good.

I’ve beaten up a lot of companies in the past week, so maybe I’m getting a little soft. But I did get an optimistic sense that the future looks brighter now than I have felt in the last six months.

I also committed two faux pas and broke two of my typical investing rules. I bought in the first 15 minutes of a trading day, and I added to a losing position.

After their annual filings, I gave ZOMD one of the largest downgrades I’ve ever given a stock. 4.25 stars down to 3. That’s where they remain for now.

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Disclaimer:

My intent is for my reviews to be a bolt on to due diligence that you have already completed. I receive dozens of review requests a week, therefore my own DD may be great or none whatsoever. Unless otherwise stated or implied, my opinions are on the financial performance of the company based on their most recent filings. I conduct these reviews to assist other retail investors whose research skills are limited when it comes to reviewing financial statements. I do not accept compensation of any kind from company’s I review.

Wolf FINS Reviews are intended to be informational and are based on personal opinion. They are not intended to be financial advice, and all readers are encouraged to perform their own due diligence prior to their investment decisions, including discussions with their investment advisor.

When I first reviewed ECOM four and a half years ago, it would have been hard to imagine then that I’d basically get caught up in what has amounted to a public bet with the CEO about the health of their balance sheet.

That’s where we are.

During covid I was a customer of one of their brands, truLOCAL. I honestly can’t remember if my interest in the stock then turned into being a customer or vice-versa. Either way, by the end of December 2022, I was neither a customer or very interested in covering their stock any longer. Those decisions were not related. The truLOCAL brand is a good one. My needs and circumstances changed. But the overall company was in my mind, un-investable. The market agreed.

The company made some big bets during that “covid era” in acquiring multiple e-commerce businesses. In late 2021, they acquired BattlBox Group and WholesalePet for a combined $44M USD. That included about $16M in potential earnouts with the balance in upfront cash or shares. Ultimately they took significant capital losses when sold and/or goodwill impairments. Those proceeds were used to significantly pay down their debt. Even two of their current brands, truLOCAL and UnderPar experienced a combined $8M in asset impairments in 2023. In short they significantly overpaid for those acquisitions. In fairness, you could lump them in with many other companies who were doing the same during that timeframe.

In the last year to eighteen months, Emerge Commerce has had a bit of a resurgence - re-emerged if you will. With a focus on core businesses of online golf and truLOCAL along with some debt reduction, they have garnered more interest from the microcap community. The TSA discord (co-founded but no longer a part of) even made them a 2026 Top Pick at a dime back in late November.

Things have cooled off since the company’s 52 week high of 15.5 cents around Christmas of last year, and it has traded between 7 and 9 cents for the past few months, most recently closing at $0.08.

When I last reviewed ECOM after the first quarter, I cited some balance sheet and liquidity worries and strongly suggested I felt the company would need to raise capital in the not to distance future, likely by the time they delivered their annual results next April.

This caused a lot of back and forth in that previously mentioned discord which ultimately had the CEO stating this:

Interestingly (to me anyways), is it is a bit of a similar situation as we had one year ago. In my relatively positive review one year ago, I said this:

In March, Emerge commerce acquired Viral Loops, a B2B marketing referral platform for $2.3M. While it didn’t seem to be a natural fit with their core business, you could see the potential for some synergies and was reportedly a nice little add on business that did a little over $100k a month in revenue with high cash flow conversion.

I did not love the company’s usage of an AEBITDA 2.9x multiple as the only profitability metric used in the press release. I publicly questioned that usage:

In response, this revised news release came out a few days later:

While not perfect, I appreciated the additional colour and it’s always a good day when I can play part in getting more clarity and disclosure for retail investors.

At the same time as the Viral Loops deal, a private placement was announced to fund the acquisition. It was originally announced as a $1.8M raise, then later upsized by 50% to $2.7M.

Now, I went into this level of detail in large part due to the CEO recently saying this:

But, ya kind of did though. The purchase price was $2.1M with a $200k earn out one year down the road. You didn’t upsize it to $2.1M or $2.3M, but $2.7M. I don’t fault Ghassan for doing it, there was a lot of interest in the stock. The additional $600k above the initial cash outlay immediately helped your working capital. Feels like a marginally dishonest statement to make. At best.

I certainly did not anticipate spending this much of my Sunday morning on this introduction. Again, here we are, and I will forever be committed to reviews of the stock as a result.

About five weeks ago, Emerge reported some preliminary numbers for these financials. They really didn’t have much impact on the share price and in my recent August What’s Wolf Watching earnings preview, I told readers to fade the company until after these results and re-evaluate.

It’s time for that re-evaluation. Let’s get into it.

If you didn’t get the title reference, it’s the 1991 movie, “He Said, She Said”, starring Kevin Bacon and Elizabeth Perkins.

Balance Sheet:

We already had a handle on revenue from their preliminary numbers, so I was most interested in seeing their balance sheet and cash flow statements.

In my last review, Emerge had a .84 current ratio and .48 quick ratio. Those improved modestly over the past three months to .88 and .59 respectively.

They ended Q2 with $4.8M in cash, $3M worth of inventory, $631k in A/R and $644 in prepaids over top of $10.3M in current liabilities (deferred revenue removed) due over their next twelve months.

Emerge doesn’t provide aging reports with their A/R, but with two thirds due from payment processors, everything appears to be fine.

The company has $5.5M of traditional debt which was recently amended in March to the higher of TD prime + 6.55% or 9%. With TD prime at 4.45%, their effective rate is closer to 11% currently. They further state in their MD&A that they are “making meaningful progress toward refinancing its senior debt, which remains one of management’s key priorities.”

With the maturity of the debt in October of next year, and considering they just amended this debt in March, that feels very optimistic. At least if the intention is to stay with their current bank. My guess is if they are successful in this endeavour, it will be through an alternate lender.

Potentially more interesting, but certainly more pressing is their $1.3M in convertible debt. Just around the time when we will see their Q3 results in late November, this $1.3M is scheduled to convert at 13.5/share. That feels like it would be a painful pill to swallow for debt holders. The company was able to negotiate an amendment in May of 2024 to settle half of this debt at 13.5 cents/share, but the scenario is quite different now. More on that later.

Cash Flow:

Emerge has generated $1.2M of operational cash flow (OCF) through their first six months. That figure is down by 21% to last year and Q2 came in at $1.59M, down 26% from the comparable period last year.

They utilized $2.1M for the acquisition of Viral Loops, another $200k related to Tee2Green and an additional $350k in deferred consideration. They made $441k of interest payments while reducing principal by $17k, and paid nearly $100k in issuance costs related to the re-financing of their debt.

On an incoming basis to the treasury, they received a net of $2.57M for their March private placement. Overall the company’s cash position has improved by 16% from the beginning of the year.

Share Capital:

• 179.4M shares outstanding, 20% dilution since the beginning of the year, 29% over the last eighteen months

• 13.5M warrants at 15 cents, 773k broker warrants at 10

• 273k options which I believe have an 11 cent exercise price

• 2.2M outstanding RSU’s. 2.9M RSU’s converted into shares YTD

• 15% insider ownership

• CEO was buying in the open market about a year ago including exercising some out of the money options. One director particpated in the March raise for $50k

• Potential of 10.3M of dilution in November with the convertible debt. But I doubt it will go down that way

Income Statement:

Revenues were up by 7.4% to $9.1M and gross margin also improved by 250 basis points to a very healthy 39%. That combination helped to improve their gross profit dollars by nearly 15% - excellent on just 7.4% more revenue.

Cash burning expenses (Marketing + SG&A) only rose by 1.7%, creating some excellent overall operational leverage in the quarter which translated to a 68% improvement in their operating income before other expenses.

The key word is “other” however as below the line due to additional debt costs, a lack of other income from last year and a 65% higher tax burden, net income was .flat to last year at $200k.

On a YTD basis ECOM achieved revenues of $15M, up 11.1%, with gross margins slightly higher from 37.3% to 37.4%. Gross profit dollars increased by 11.4%.

Cash burning expenses rose by 2.6% and once again things look great on that operating income before other expenses growing by 76% to $888k. That doesn’t hold through to the net income line due to other income generated last year and $0 this year. Net income (continuing ops) at the midway point of 2026 is down 59% to $74k.

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Summary:

Overall I think you would have to call it a decent, but likely not a needle moving quarter and that has translated to the market’s reaction. The stock is flat since the release of the financials on Thursday morning on relatively low volume.

First let’s look at the top line with a 7.4% quarterly improvement. That growth also includes a full month of the Viral Loops acquisition and technically 6 extra days of Tee2Green than last year. I think it’s safe to say that that growth can be approximately evenly split between organic and non-organic growth.

Viral Loops has already seemingly had an impact to the gross margin line which grew by 250 basis points in the quarter. The company also anticipates margin improvement within Tee2Green to hopefully offset some of the margin challenges in TruLOCAL due to cost of beef and increased oil prices.

While Emerge has looked very good on the total operating expense line, the reasons for that are less costs on consultants and professional fees. The impact of the Viral Loops transaction and investments in HQ staff have increased their payroll slightly and G&A quite dramatically.

Now let’s get back to the two statements I thought were of more importance, their balance sheet, and their cash flow.

Bottom line is I haven’t changed my stance on my belief that the company will likely need to raise capital by the time they present their year end financials next April.

If you remove deferred revenues from their current liabilities, they have about $10.3M in liability commitments over the next twelve months. In terms of liquid assets (removing inventory), they have $6.1M, and that creates a shortfall of a little over $4M, similar to what it was three months ago.

To avoid the need to raise capital, they could make up that working capital deficit through operational cash flow. But on a TTM basis, they have produced less than half of that shortfall, and this past quarter is historically their best performing OCF quarter. While this past quarter was down to last year, part of the reason why was the shrewd inventory payment plan as part of their Tee2Green acquisition last year, so last years number was slightly inflated. While I expect them to improve their OCF to last year over the next couple of quarters, I don’t think they can come close to making up that $4M or so deficit.

Ghassan was pretty adamant in his discord comments when he claimed, ”No, we do not need to raise capital for working capital, in 2026.”

That makes this comment within the recent MD&A even more interesting. Well, financing activities would include a capital raise. The alternative would be through adding debt.

I did not listen to the earnings call, but I did download the transcript. Based on everything I’ve said up until now makes this question coming from an analyst quite remarkable. They do not have EXCESS cash to do anything with. This guy/gal should quite frankly remain unknown.

Lastly are these $1.3M in convertible debentures which expire in three months. These notes date back to 2022 and were originally priced at a conversion price of $.20. The total then was for $2.8M with 10% interest. They were originally set to expire last November.

In April of last year, the debenture holders and the company agreed to amend them. Approximately half of the amount including accrued interest was converted into shares at 13.5 cents, and the balance was extended for a year until this November.

For the remaining $1.3M, the debenture holders have the leverage here. The default payment obligation is in cash. The holder can indeed select to convert those into shares at 13.5 cents, but how likely is that when the share price is currently at 8?

I can’t see the debenture holders demanding the cash as that would make the company’s liquidity situation worse than it currently is. My guess is we will see another amendment.

There are alternatives too. Refinancing of that debt could include an increase to it at more favourable terms. That would allow them to pay off these debentures, and if they increased it enough, eliminate that working capital deficiency to avoid a raise of capital through a private placement.

If that’s how it went down, would that make Ghassan and I both right? Or both wrong?

Emerge is currently is valued at a $14.3M market cap. That’s roughly a P/S ratio of under .50. But if that is solely how you make your investment decisions, you probably make a lot of poor ones.

They are about breakeven on a net income basis and are priced around 15 on an EV/EBITDA basis. Not expensive per se, but at that ratio I’m going to want to see more than just 3-4% organic growth and a liquidity situation I’d be more comfortable with.

Three stars.

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Disclaimer:

My intent is for my reviews to be a bolt on to due diligence that you have already completed. I receive dozens of review requests a week, therefore my own DD may be great or none whatsoever. Unless otherwise stated or implied, my opinions are on the financial performance of the company based on their most recent filings. I conduct these reviews to assist other retail investors whose research skills are limited when it comes to reviewing financial statements. I do not accept compensation of any kind from company’s I review.

Wolf FINS Reviews are intended to be informational and are based on personal opinion. They are not intended to be financial advice, and all readers are encouraged to perform their own due diligence prior to their investment decisions, including discussions with their investment advisor.

Yayo. Yayo.

Since there are so many options of financials to review, I summoned a poll within the Wolf Den discord last night. NTG Clarity did not win, Kraken Robotics did. I’m vetoing that since Kraken’s Q2 financials do not include their splash acquisition that occurred on July 2nd, a couple of days after Q2 closed. Their third quarter will give us a better look at the combined entity, so it will receive higher priority there. NTG received the second number of votes. If I had my preference, I would be writing about the company who came in third, so we’ll call this a compromise.

By peak potential returns, NTG Clarity is my second best performing Wolf Pick. It came within the 2024 batch, selected at a mere three cents. They cleaned up their share table with a 5:1 reverse split shortly thereafter and then catapulted to $2.97 cents in the next eighteen months. It’s been on a steady decline since for various reasons that I’ll surely get into later. While I made some healthy profits here, I came far from maxing out on my returns when it was a nineteen bagger, and I no longer hold a position.

I briefly glanced at NTG’s financials late last night, and as I was trying to fall asleep, I couldn’t decide whether I wanted the theme of this review to be Rihanna’s, Bitch Better Have My Money, or Whitesnake’s, Here I go Again.

The company has had cash flow problems stemming from their accounts receivable for as long as I can remember, and I feel as if I have discussed that problem ad nauseam. Let’s go with a dual theme, because….

Balance Sheet:

On the surface, NCI has what appears to be a very healthy current ratio of 3.4. Most companies I review only dream of that number.

The company has $41M of current assets overtop of just $11.9M in current liabilities. 87% of their current assets are made up of accounts receivable, with just 7% in cash.

A quick ratio measures a company’s liquidity, and NCI looks very good there too. A quick ratio removes current asset items that couldn’t be “quickly” converted into cash - inventory for example.

When it comes to NTG, you simply cannot include their accounts receivables in their quick ratio, because there is nothing quick about their broken billings and collections.

The company’s problem is multi-faceted which just amplifies the problem.

Firstly, they delay billing their customers until well after the work is done, potentially in some cases up to three months. Look at the Contract Asset section below. NTG recognized $18.6M in service revenue in Q2. That figure matches their contract assets closing balance. For all the work they did between April 1st and June 30th, they didn’t send out one invoice during the quarter.

Second is NTG’s terms which are a ridiculous 30-180 days meaning that when they get around to sending you an invoice, they may allow you up to six months to pay it.

Lastly is the management of their collections. Only 42% of their receivables (that they have billed) are current. Those could be anywhere within that 30-180 day term window. My guess due to the history of their receivables is the majority of their billing is done closer to 180 days.

The company currently has $2.1M in the 91-180 day past due window. Here is a potential scenario of how old those $2.1M in revenues might actually be.

April 1st, 2025 (the start of Q2 2025), NTG makes a sale to a customer but that sale sits in contract assets until they bill the customer the following quarter - let’s say on July 5th of 2025.

NTG ends up granting this customer terms of 180 days, meaning they have until January 1st of 2026 to pay. Then they don’t pay on time and as of June 30th of 2026 it still hasn’t been paid. That $2.1M could technically date back as far as a sale from 16 or 17 months ago.

Is it that old? We’ll never know. But just due to the technical potential that it could means that their process if extremely broken.

Frankly I don’t give a shit about the rest of the balance sheet, so let’s move on.

Cash Flow:

Everything I mentioned above strongly suggests their operational cash flow was going to be problematic. And it is. NTG burned through $4.6M in the quarter and since they were cash flow neutral in Q1, their YTD burn rate is also $4.6M. That is double their burn rate at this stage last year. Their A/R problem is not new, it’s systemic.

After minor financing and investing activities, they ended Q2 with $2.85M of cash in the bank, depleting two thirds of their cash on hand they started their fiscal 2026 with.

A near or mid term raise is definitely on the table here. I would normally add debt as an option here but I’m not sure a bank would give them a loan with the state of their accounts receivable.

Share Capital:

• 48M shares outstanding, 14% dilution in the last 18 months

• 2.6M options with 1.5M ITM. None expire for more than one year

• Approx 2M useless warrants at a $2.95 exercise price expiring in July of 2027

• 36% insider and 1.25% institutionally owned

• Insiders have not had an activity in the open market since Sept of 2024, when they sold at $1.81

Income Statement:

I’m just going to talk to the YTD results as the quarters were quite similar. I’m also very eager to get to the summary.

Revenues came in at $41.4M, a 7% improvement over last year. Gross margin decreased by 270 basis points from 36% to 33.3%. Gross profit dollars were down 1% thereby not making any gains from that extra 7% of revenue.

Total expenses grew by 44%, but that includes a massive $816k birdie from foreign exchange to last year. When just looking at their cash burning expenses of Selling & Marketing and G&A, those costs rose by 56%. That level of spending on 7% more revenue with less gross profit dollars spells doom for the P&L.

Net Income before income taxes decreased by 98%, from $4.5M last year to under $75k so far this year. Even though revenue was up, when your gross profit dollars are down, those extra sales are meaningless. Therefore they get awarded the reverse Wolf Trifecta.

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Summary:

B*tch better have my money. Pay me what you OWE me.

This should be the motto of NTG Clarity, but it’s not. I don’t believe there in an adult in the board room to make the decision that significant changes need to be made to their business model.

Below is the P&L for NTG Clarity in the first full year after they became a Wolf Pick. It was immaculate. 102% more revenue. Gross margins over 37% and growing which delivered 137% more gross profit dollars.

Spending was up then too to support that growth but the rate of those expenses grew at a lesser rate than revenue and gross profit. That’s how you achieve a Wolf Trifecta.

Most importantly, more than 17% of every revenue dollar funnelled all the way to the Net Income line.

Normally this would have easily been a four or more star performance. But I rated it at 3.5 stars due to their cash flow and receivable situation that I pointing out concerns with even back then.

When these financials were released back in April of 2025, they talked about getting very aggressive in their pursuit of higher revenue. That would require significant extra dollars in terms of payroll and training costs for new engineers and other staff. They also changed the way they issued market guidance. After guiding on net income previously, they were going to move to dreaded AEBITDA. Given that guidance I put a price target of $2.70 on the stock. Within six weeks it hit and surpassed that number and achieved that $2.97 ATH. In hindsight, this was the signal to take some significant profits off the table. I tried with a $2.99 ask and missed.

Since then they did admirably on their revenue guidance, but significantly missed the rest due to depressed margin and out of control spending.

The worst part about their performance continues to be their cash flow and that all stems from their complete and utter incompetence when it comes to their accounts receivables. Below I’ve added a chart that shows the history of their quarterly revenue performance, along side of the growth of their receivables.

When revenue is going through the roof, it’s understandable that your A/R will grow along with it, and often that can present some temporary operational cash flow issues. But that receivables line should be flattening long before the revenue line does. It does the opposite in NTG’s case and continues to rise significantly.

The worst part of this is, I still think management doesn’t get it. I first had these feelings after the company presented their 2025 annual financials in April.

Here is what I said after their conference call:

If feels like everything I said back in April has already come to fruition.

To add insult to injury, the company has also been significantly impacted by events in the Middle East. But it is my belief that even without the Iran conflict, we would probably be talking about the same things. Their revenue might be better, but their A/R would likely be an even bigger problem.

Bottom line is they need to re-tool. Cut some of the staff they hired. It’s not working. Most importantly, fix your broken A/R process. That includes billing, terms and collection.

Downgrading them all the way to two stars. Their lowest ever.

Bitch, go get your money.

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Disclaimer:

My intent is for my reviews to be a bolt on to due diligence that you have already completed. I receive dozens of review requests a week, therefore my own DD may be great or none whatsoever. Unless otherwise stated or implied, my opinions are on the financial performance of the company based on their most recent filings. I conduct these reviews to assist other retail investors whose research skills are limited when it comes to reviewing financial statements. I do not accept compensation of any kind from company’s I review.

Wolf FINS Reviews are intended to be informational and are based on personal opinion. They are not intended to be financial advice, and all readers are encouraged to perform their own due diligence prior to their investment decisions, including discussions with their investment advisor.

Three companies I regularly cover, Kraken Robotics, Emerge Commerce and Progressive Planet are all out with financials since yesterday’s close. The 2026 Wolf Pick will take priority.

Selected at $0.29 back in mid December, the stock is currently up 31% from that selection, and has bounced nicely out of my recently identified Buy Zone.

The five plus months since we had a chance to last look at their Q3 financials has felt like an eternity. Those financials received a 3.5 star rating, which was aptly named “Shut up and take my money”. I’ve attached it below for your perusal should you choose.

It’s hard to imagine a better headline after that long wait than this one:

With plenty of reviews to write over the next ten days or so, let’s get into it and see if the meat and potatoes are worthy of the headline.

Balance Sheet:

PLAN ended the year with a healthy current ratio of two, which consisted of $2.25M in cash, $1.8M in receivables. $2.4M worth of inventory and $400k in prepaids against $3.3M in liability commitments over their next twelve months.

We already know that they had a record sales year and with inventory down 7% YOY signals increased efficiency and better inventory turnover.

No issues identified within their A/R aging report which looks pretty stellar at 86% current, and the majority of ones slipping are under 30 days past due.

Progressive Planet has $5.6M of debt, the vast majority under a 23 year mortgage with BDC at 5.05% interest. This replaced a BMO revolving demand loan therefore this change offers them more flexibility.

No surprises. That’s always nice.

Cash Flow:

The total OCF for the year of $3.5M is down 31% from the $5.1M they generated in 2025 and that might raise an eyebrow.

That variance however is mainly due to working capital adjustments related to timing of grant income received and unrelated to the day to day operations of the business. Prior to working capital adjustments, PLAN’s OCF improved by 13%.

Their fiscal 2026 was a big year on the investment side of the business. Over $5M was utilized for automation equipment for their legacy business in addition to building improvements for their PozGlass pilot plant.

During the year they also invested $650k in an unnamed public company, after similar investments of $400k last year for which they recorded minor gains for over the last two years. Post financials, it appears they sold their stake in these companies for a loss of $117k. Let’s focus on the business Steve and leave the trading of stocks to me.

PLAN reduced their overall debt by $764k and received a little over $100k from exercised options during the year.

Overall, their cash position depleted by 59% due to their capex.

Share Capital:

• 110.3M shares outstanding. 2.2M less shares than two years ago through share buy backs - all of which occurred in their previous fiscal year with the stock in the ten cent range

• 6M options outstanding - all ITM.

• 31% insider ownership with a minor stake from one institution.

• In a very surprising move a significant amount of options that were well ITM went unexercised in the last few months.

Income Statement:

I spoiled it with the news release headline but Progressive Planet ended 2026 with record revenue of $23.2M, up 19% from a year ago. Gross margins also improved by an incredible 470 basis points to 35.8%. This combined to drive gross profit dollars up 37% on 19% more revenue. Much of the improvement is due to lower amortization costs on equipment, but we’ll take it anyway we can get it.

Operating expenses grew by 55%, highly impacted by a one time slotting fee in Q3 which impacted Advertising costs which rose by 90% on the year.

R&D costs stemming from their PozGlass pilot rose significantly as well to $1.56M vs only $319k a year ago which included significant Q4 spend.

Earlier this year the company also impaired an exploration asset for a total of $1.2M.

Even after those one time hits to the P&L, they still finished ahead of last year on the Income before taxes line, $1.42M vs $1.23M.

Sadly below that they paid $384k in taxes vs a tax recovery of $443k last year. That took their net income to $1.04M vs $1.67M.

Unfortunately the company doesn’t provide a detailed accounting of their Q4, but revenue was up by 12% in the quarte and the company suffered a net loss of $172k, in large part due to $650k in R&D spending for their PozGlass pilot plant.

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Summary:

Overall, you would have to call 2026 a pretty successful year for Progressive Planet. Unfortunately their P&L suffered a couple of one time hits, significant R&D spending and additional taxation which makes their bottom line look rather unsexy when compared to a year ago.

As PLAN moves into 2027, they will have the full benefit of their new robotic palletizers which should increase efficiencies and deliver some operational leverage. The slotting fee paid to Tractor Supply will continue to pay dividends throughout the year also.

The company is also extremely close on the commissioning of their new pilot plant for PozGlass. Investors should get the latest update on that initiative when they have their “earnings call” with Radius Research on September 9th, which I’ll sadly miss due to vacation. I’m also hoping we will get a better understanding of what their additional capex targets and R&D spending are for next year.

Due to the one time items the company is going to look more expensive on profitability metrics. The slotting fee and asset write off amount to more than $1.5M which would have taken their 2026 net income to about $2.6M.

All of that only discusses their current legacy businesses and doesn’t factor in the future with PozGlass and the potential there.

Early in trading the stock is pretty much trading sideways. We waited a long time for these financials but that won’t be the case for Q1 as that will be out by the end of September. I think that could be a better guide without these one time items.

Maintaining my 3.5 stars and my current position.

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Upgraded to three stars at 8 cents at a sub $9M market cap in November of 2022. Selected as a Wolf Pick a month later at a dime. The pick is currently up 1570% and once hit $2.35 for a twenty-three bagger. They are now greater than a quarter billion market cap company today. If there’s a better story on the CSE in the last five years, I’d like to hear it.

In the words of SNL’s Chico Escuela, Happy Belly Food Group has been berry berry good to me. That doesn’t mean the company gets any free passes however. My stock holdings and especially my stock picks do tend to get some extra scrutiny, particularly when they release financials.

My last two reviews were not great ones. In fact, the last one I issued the company my first ever downgrade of the stock in the four plus years I’ve been covering them.

I called that review, “Under Pressure” as I felt then that there was extra significance on these financials just released to the market. I still feel that way.

On a sequential basis, revenue was soft (heavily influenced by seasonality), and they had the worst back to back operational cash flow quarters since the company became relevant. Margin was wacky and cash burning expenses (irrespective of the large share based compensation) used to support their growth aspirations caused their P&L to look like a dog’s breakfast.

It was deserving of the downgrade. I firmly stand by it despite the incessant whining by the Neanderthals' on stock picking forums who quite frankly couldn’t hold my jock strap when it comes to evaluating company’s.

I had trimmed my position late last year as the stock crossed $2, and despite my downgrade I added to my position twice leading into these financials in the Buy Zone below. This was also repeated in my recent What’s Wolf Watching article earlier this month.

But after my last review, I was still bothered by the limited visibility we have into the seasonality of the business on the QSR revenue side of the equation. With openings across many different brands, whether or not they opened on the first or last day of the quarter can significantly impact their top line numbers. I wanted to find a better way to smooth these numbers out, and to take my first stab at a QSR sales estimate for this quarter.

That involved taking about eight quarters of history and finding out how many days they had a QSR location open and coming up with an average. That led me to a a mid point estimate of $26.9M in QSR sales for this quarter. That would represent a 66% increase over last year and 40% sequentially.

My intro’s to Happy Belly Food Group’s reviews tend to get longer with each quarter. Let’s end the madness here and get on with the review, see how I did with my first estimate and see how the rest of the financials shape up. Are they deserving to get that quarter star back?

Balance Sheet:

Here is where I anticipated we would see some significant improvement and for the most part, we have achieved that. But some surprises emerged.

Happy Belly ended Q2 with a current ratio of 2.6, improving from the 2.2 they ended Q1 with. That consists of a record $12M in cash, $3.6M of receivables and $800k in other short term assets overtop of $6.2M in liability commitments over their next twelve months.

Their cash position alone is nearly double their one year financial commitments so they are also in the strongest liquidity position they have ever been in.

Can you sense a “But” coming?

I was bothered by the companies accounts receivables last quarter, and these financials have presented some additional fodder. Approximately a third of their A/R is made up from insiders. These amounts specifically relate to the options and warrants they exercised in June.

There is some irony here. After the first quarter I made the case that insiders could very likely sell, or organize some block trades in order to finance the significant amount of securities they had to exercise - just as the CEO, and former CEO did themselves not that long ago. Well, yours truly was accused of all sorts of things for that mere mention including trying to drive down the share price for my own nefarious purposes.

I simply mentioned this as a fact of life. Not everyone has hundreds of thousands of dollars in immediate liquidity to pull that off. Fast forward three months and not only did one insider pull off a block trade, but two others were “loaned” the cash/shares, and now that $1.4M is sitting in one balance sheet account rather than the cash line.

Now, I’m ok with this as a temporary measure rather than these insiders trying to organize a block trade below market value which may push the share price downwards. If it’s gone by this quarter end and it ends up in the cash column when we look at Q3 in November, we’re all good.

But to all the haters out there who doubted what I said or my motives - this is why you can’t hold my jock strap. You spiked the football way too early.

If we take that $1.4M out of receivables, we’re down to $2.12M of typical A/R. I say “typical” in a loose way because in this type of business, these receipts are due primarily from franchisees, rather than invoicing customers for goods in the traditional way we normally think about it.

Therefore last quarter’s $2.42M, a number which had risen by 44% from their year end looked a little concerning. Particularly since that did not include over $200k in which the company had deemed uncollectable.

Post Q1 financials we learned of a Pihro location closing and the rest of Joey Turks QSR locations appear to be suffering the same fate. We can therefore assume that those write offs are related to these closures.

There are really only two reasons for A/R to age in this sector. Whomever is in charge of collections is not doing their job to the best of their abilities, or the franchisee is just unable to pay on time. That can speak to an overall health of a location or locations, and sadly that appears to be the case with Joey Turks. Most investors (I’m looking at the yawners here) would gloss over this account. Don’t.

The good news is these receivable amounts have come down considerably (12%) in a quarter where they just blew the doors off on the QSR revenue line. That’s encouraging regardless of how the last couple of paragraphs may have sounded.

In terms of debt, HBFG only has $1.4M in convertible debentures.

While I got sidetracked on some explanations above, this was a good balance sheet quarter for the company, significantly shoring up their cash position. They doubled what it was a quarter ago, and quadrupled it from six months ago.

Cash Flow:

Happy Belly generated $600k in operational cash flow (OCF) in the second quarter, down 16% to the comparable quarter a year ago. On a YTD basis they have burned $340k of OCF vs generating $556k at the half way point of 2025.

Within investing activities the company spent $430k on asset spending and received $944k through their divestiture of their CPG brand, Holy Crap.

Financing activities was where all of the action was, receiving $9.3M into the treasury for options and warrants exercised. ALL from insiders.

Overall, their cash position is up 297% from where they started the year.

After a great A/R quarter, it’s disappointing to see them not match and improve on last year’s OCF number. You could also argue that number is also somewhat inflated as 97% of it is related to working capital adjustments. Last year they delivered $435k in OCF prior to these adjustments. This year, $17k on a heck of a lot more business. That suggests we are going to see some issues when we examine the income statment.

Share Capital:

• 166.4M shares outstanding, 29% dilution over the past year with most of that occurring in the quarter

• 17.9M warrants outstanding, all at $2, all tied to share price performance and all expiring in Nov 2030

• 12.7M options, only 500k currently ITM. The remainder at $2 are similarly ones that vest upon share price conditions

• 12% insider ownership, 6% institutional per SimplyWallSt

• Even with exercising warrants and options, insiders are continual participants in the open market. That includes nine transactions from three different insiders in the month of July alone

Income Statement:

Total revenue was up by 56% in the quarter with significant double digit gains across their three revenue silo’s - product sales, franchise revenue, and consulting income.

Gross margin was off to last year by 550 basis points. HBFG doesn’t show a traditional margin line on their P&L due to their silo presentation of their revenues. Their COGS is shown as direct operating costs and that is applied to only product sales. The offset of course becomes their gross margin.

Franchise revenue is effectively 100% margin (I’ve referred to it as gravy before) which basically goes directly to the bottom line.

So on 41% more product sales this quarter, they only delivered 26% more gross profit dollars in that segment. When you add in the “gravy”, 57% more gross profit dollars.

For the rest of the P&L, I’m going to strip out the SBC costs and speak to that separately in my summary.

Happy Belly has two major cash burning expense buckets - G&A, and payroll. G&A costs rose by 72% while payroll increased by 89%. Both of those percentages you will notice are higher than their rate of revenue, but more importantly higher than their gross profit dollars, even when you add the “gravy”. That is going to combine for a worsening performance within their profitability metrics.

After slightly higher depreciation costs and an $86k credit loss, their operating income (SBC excluded) fell from a gain of $221k last year, to a loss of $338k this quarter.

On a YTD basis, the metrics tell a similar story:

• Total revenue is up by 66%

• Gross margin on product sales off by 740 basis points from 54.6% to 47.2%

• Gross profit (gravy included) was up 60%

• G&A costs rose by 85%, payroll by 84%

• Operating income from a $219k gain to a loss of $832k, or $1.05M worse than last year

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Summary:

That’s a lot of information thrown your way so far. Let’s break it down this way:

The Good:

They blew away my QSR sales estimate by $1.5M. That tells me a couple of things. The average revenue per location per day was much higher than my $3100’ish estimate I used (I will go back and recalculate post review to come up with my Q3 estimate). That also suggests to me that a significant part of their growth has been organic. Rosie’s appears to have been a large part of that impact. Last year, they made up 12% of all locations, this quarter it was 17%. Rosie’s is clearly a hit and with a higher AUV than Heal, more Rosie’s are a great thing.

The company is also in the best financial situation from a balance sheet perspective they have ever been in due to the influx of cash from all of those performance options and warrants. They also deserve credit for improving their A/R QoQ after I listed it as a concerning metric three months ago.

The concerns:

Firstly, I was hoping the previous section would be longer.

After driving nearly $1M in positive OCF in 2025, this is now the third straight quarter where OCF has been worse to last year and this quarter takes them slightly negative on a TTM basis.

This is of course all due to their cash burning expenses outpacing their revenue and gross margin dollars.

The question is how bothersome should that be to investors? The company is expanding at an extremely rapid pace, and often that is going to cause expenses to get ahead of that growth curve.

The cause for the spike in the last three quarters is two-fold. The main cause is a near tripling in advertising and marketing expense. I think this one surprises me the most. Apart from influencers, I haven’t seen other very large campaigns. I guess the social media influencer business and naming a smoothy after them is much better business I would have thought.

The second is a one time hit, and a pretty healthy one at that related to their SBC (highlighted above). That one time hit is responsible for 65% of their profitability miss to last year.

The other thing to consider is the company now has the balance sheet and liquidity to absorb a little bit of worsening here and there with their OCF. That couldn’t be said as little as a year ago. If they faced this situation a year ago, another round of convertible debentures might be on the table. That’s not where we are and that affords HBFG the luxury to be a little more aggressive on their spending to expand the network. The big test will be in Q4 and Q1 when they face the reality of seasonality impacts. What they can’t do is further compound on these recent numbers:

Things I’m neither concerned or overly exited about:

SBC Costs - Yes, upon glancing at the P&L, that hit looks grotesque. But if you have ten cent shares and been following the company for this long, you should have known this was going to occur. You can’t celebrate a $2 stock price and then complain when the back end of SBC kicks in with their time of incentive program. Seriously, shut up about it.

Joey Turks and Pirho closures - Sure, it’s disappointing, and for someone who has managed franchisees it’s a sad moment when one goes down. While showing empathy, these brands cost HBFG very little. Some will be Home Runs, some will go down swinging, and that’s ok. But, watch that A/R number for signals that others could be on the horizon. Problems will arise there first. Let’s not forget the closing of Ghost Taco is also on the horizon. I feel pretty good about that one.

Texas - I’m aware of all of the fanfare Heal’s launch into Texas is having, but I’m a lot more cautiously optimistic than the average retail investor when it comes to this. It’s been 15 months since the ten unit agreement was signed for Lubbock - home to the Texas Tech Red Raiders and Texas’ tenth largest city. Two of those ten are in development, likely to open in the next couple of months. My lack of exuberance relates back to some of the concerns we are seeing with their level of spending. Two locations this far away from corporate and in a different country is going to stretch operations and add cost. Obviously, you have to start with one and two before you can get to ten and beyond. My exuberance level will match that of others if and when that happens.

So the market isn’t overly enamored with yesterday’s results. It’s just past 11 am as I write this, the stock initially pulled back about 8% and now settling in around the top of my Buy Zone leading into these financials.

Days ago, I said I thought these financials would push the stock to challenge $1.77 resistance. Clearly that isn’t happening but I feel the market is getting it right so far.

The stock price the day before their Q1 was $1.58. Currently, it is $1.60. Basically flat. The market cap on the other hand went from $211.8M to $266.2M, an increase of 26%. That’s the power of dilution, and while I strongly defend the company’s SBC program, the end result is I think the current price is pretty fair given these results.

The price is right!

Maintaining the three stars.

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Disclaimer:

My intent is for my reviews to be a bolt on to due diligence that you have already completed. I receive dozens of review requests a week, therefore my own DD may be great or none whatsoever. Unless otherwise stated or implied, my opinions are on the financial performance of the company based on their most recent filings. I conduct these reviews to assist other retail investors whose research skills are limited when it comes to reviewing financial statements. I do not accept compensation of any kind from company’s I review.

Wolf FINS Reviews are intended to be informational and are based on personal opinion. They are not intended to be financial advice, and all readers are encouraged to perform their own due diligence prior to their investment decisions, including discussions with their investment advisor.

The 2026 (and 2023) Wolf Pick came out with results after hours Monday. The stock is currently up a respectable 19% from the $0.58 selection, even though a look at the one year chart could make one a wee sea sick.

The company is coming off a weak start to the year from their Q1 financials - a review in which I downgraded the stock to 2.75 stars. While I kind of expected the company to be a bit of a late 2026 bloomer, the 15% decrease in revenue with margins as skinny as a toothpick was not the start to the year I was hoping for.

The stock initially dropped by 16% on those earnings, and I had expected it to trade sideways (at best) until they had some news or released some improved financials. But that isn’t what happened. The stock rose as much as 34% between July 9th and August 12th with no rationale that I could discover.

That led me to say this in my monthly What’s Wolf Watching article a couple of weeks ago

Let’s get into the review.

Balance Sheet:

Normally, I would herald a company with a current ratio of 1.7 like we have here, but a current ratio isn’t necessarily the best measurement of one’s liquidity.

Like their first quarter, the company is into their line of credit leaving them cashless to end Q2. They have $9M in accounts receivable, $11.2M worth of inventory and $1M in other current assets over top of $12.4M in liability commitments (customer deposits removed) due over the next twelve months.

They are $670k deep on their available $7.5M operating LOC which has an accordion feature up to $12.5M.

In addition, Atlas has $16.3M of debt across three mortgages and loans with TD, all at 6.37%. The term loan matures seven years from now with the mortgages all the way out to 2047 and 2048.

Aging of receivables has improved from 51% to 71% current from the start of the year, and the company is not anticipating taking anything significant in the way of write offs.

Inventory levels are up by 47% or $3.6M from the start of the year, significantly more than their rate of revenue gains.

Cash Flow:

AEP has generated $2.8M of operational cash flow (OCF) compared to just $861k a year ago.

Like the balance sheet, sometimes the overall numbers and ratio’s don’t tell the entire story. While OCF improved by a factor of 220% over last year, it’s heavily assisted from increased customer deposits and accounts payables growing by $4.4M - a good portion of which are likely due to their suppliers from their inventory investments.

Atlas has invested over $7.3M so far YTD into buildings and equipment to support their new Robotics facility and they have received $3.6M out of a total of $4M from grants from the federal government.

They have reduced their overall debt burden by $871k since the start of the year and the treasury has received $87k from insiders exercising stock options.

Again, they ended the quarter with $0 cash in the bank and are currently living off of their LOC.

Share Capital:

• 71.6M shares outstanding with 2% dilution YTD, mainly due to the Penn-Truss acquisition a year ago with performance conditions kicking in during Q2

• 5M options outstanding, about 1.1M currently ITM between 60 - 67 cents. 600k of which expiring within one year

• 15% insider ownership with BMO asset management as the largest institutional and overall shareholder at 10.1%

• No insider activity on the open market since last fall - many of which at prices higher than today

Income Statement:

After a Q1 where not much positive could be said about their P&L, they get back into the winners column on the revenue line with $16.2M, a 19% improvement over the comparable quarter. Margins came in 50 basis points higher than a year ago as well, increasing to 17.5% and that drove an additional 22% gross profit dollars.

One thing you can almost count on every quarter is for Atlas to be run efficiently, and that is the case again here. Total cash burning operating expenses decreased by 8.5%, mainly due to less professional fees from last year’s acquisitions.

Their net loss improved to $307k vs $708k last year, and that also includes a $270k bogey in income taxes.

On a YTD basis they are back on the positive side of revenue, increasing by 3.4%. The same can’t be said about gross margin, now down 440 basis points to last year at 12.1%. That is responsible for a 24% decrease in gross profit dollars.

Expenses once again have been very well controlled to last year but it wasn’t enough to avoid the widening of net losses to $2.04M vs $1.55M halfway through the year.

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Summary:

Better than their first quarter to be sure, but I’m not about to don my tap dancing shoes just yet.

A big part of the bull case for my 2026 revolved around macro conditions changing in Canada in relation to home building. That quite hasn’t happened yet with the latest CMHC data, but the raw starts were up QoQ which I hope to be a sign of things to come. There’s that hope word again.

More encouraging was last weeks news that the Federal and provincial news on their $1B in infrastructure investments to build new homes. Combined with other governmental initiatives (HST relief), this could potentially save homebuyers up to $200k on a new home. This specific initiative will also only be eligible to communities that do not levy development charges. That in turn should make municipalities rethink their levy costs and therefore spur additional growth for making it more attractive for builders to invest.

Alberta and the Feds announced a similar initiative last month.

After some shipping delays on their new automation equipment for their facility in Ontario, they anticipate shipping their first orders of roof trusses in September. In their news release accompanying their financials they cite increasing quoting activity and order volume increasing, although with additional lead time on orders. I’m not a huge fan of seeing quotes over backlog without knowing what their salespeople’s close rate is, but it is better than no metrics at all.

After what I will call a mediocre first half for Atlas, the bad news is the back half is much tougher than the first. They achieved 3% growth against $24.7M in the first half of the year, but now face a $38M back half just to match off what they did last year.

That’s a lot of junk in the trunk.

While I share the same cautious optimism as management does, this late bloomer may take even a little longer than expected.

Better than Q1 but not quite enough yet to warrant an upgrade. I was tempted though.

2.75 stars again.

Disclaimer:

My intent is for my reviews to be a bolt on to due diligence that you have already completed. I receive dozens of review requests a week, therefore my own DD may be great or none whatsoever. Unless otherwise stated or implied, my opinions are on the financial performance of the company based on their most recent filings. I conduct these reviews to assist other retail investors whose research skills are limited when it comes to reviewing financial statements. I do not accept compensation of any kind from company’s I review.

Wolf FINS Reviews are intended to be informational and are based on personal opinion. They are not intended to be financial advice, and all readers are encouraged to perform their own due diligence prior to their investment decisions, including discussions with their investment advisor.

Pharmacorp RX is out with their Q2 earnings this morning and the top line is right in the middle of my estimate - a good start.

PCRX is a 2026 Wolf Pick, selected at $0.425 and as of this morning an 18% gain. Respectable, but I’m here for a much better return that the upper teens. I’ve had the company in a Buy Zone for a little while leading into these results, and reiterated that in last weekend’s What’s Wolf Watching article.

If you’re new to the story, Pharmacorp RX is an aggressive consolidator of the independent Canadian pharmacy scene, with right of first refusal access to over 1100 locations. At this time last year, they owned and operated just four pharmacies. Two days ago, they announced closing two additional locations bringing that number up to sixteen.

The Q2 numbers presented here are only for six pharmacies in total, with ten additional agreements closed since the start of their third quarter. The remainder of the year will be extremely interesting.

In that recent WWW article, I had these predictions on the top line and what I was hoping to see on the rest of the P&L:

The revenue line was in range at a 76% increase for $7.72M, but how do the rest of their financials look? Let’s find out.

Balance Sheet:

Due to the significant acquisitions between June 30th and today, the balance sheet they present here is rather meaningless.

As stated the very healthy current ratio of 7.4 including $24M in cash will look dramatically different when they present their Q3 in November. They spent upwards of $30M on these acquisitions and also raised $11.5M in the seven or so weeks since the end of last quarter.

Notable that their aging report on their A/R is immaculate.

Cash Flow:

Above I said I would be fine with a cash neutral position. Well, they didn’t achieve that with $1.85M in operational burn in their first half, but here is why that doesn’t bother me.

Prior to working capital adjustments, their OCF was just shy of $900k to the positive and more than 4x greater than last year.

All of PCRX’s working capital adjustments worked against them so far YTD, including a significant pay down in their A/P. Their entire one year liability commitments is now less than $4M. Headline number isn’t great but the detail is justifiable.

Share Capital:

• As of June 30, 174.1M shares outstanding, 48% dilution since this time last year

• 9.2M options, all I believe to be ITM, but none expire for six years. I can’t say I love ten year options for company’s with continuous need of capital.

• 27.4M warrants, average price at 50 cents where the SP is today.

• 11% insider ownership & 6% institutional

• No open market insider activity but several insiders have participated in their last two capital raises in a significant way

  

• Post financials raised $11.5M (22.5M shares at $0.51 with 1/2 warrant at $0.60)

Income Statement:

Revenue of $7.73M, an increase of 76% above the $4.4M posted a year ago. Gross margins improved by 50 basis points to 40.3% which generated 78% more gross profit dollars.

Cash burning controllable expenses grew by 52% (removed $55k of SBC this quarter from payroll costs). While high, that’s still some significant conversion when the company delivered 78% more GP dollars. That also includes $385k vs $304k last year in professional fees, a number likely related to legal fees from their ongoing acquisition pipeline. Expect that number to grow in Q3.

Nearly Wolf Trifecta worthy.

Net income was slightly profitable in the quarter of $121k vs a loss of $385k last year, nearly a half million dollar improvement.

YTD metrics (6 months):

• $14.9M of revenue, a 76% increase over last year

• 39.6% a 50 bp decline

• Net Income of $242k vs a loss of $131k last year

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Summary:

So I was looking for between $7.5 and $8M in revenue. Check. Net income near break even. Check. Cash flow neutral. Not really but I’m calling it acceptable due to the working capital adjustments which I highly suspect will balance out in future quarters.

Overall, I saw what I needed to see here to keep the thesis going.

The float is now nearing 200M shares. I’ve said from the Wolf Pick selection and on many occurrences since - if you invest here, you’re going to have to stomach some additional dilution. These acquisitions, particularly the larger locations are not cheap, and they are not generating the operational cash flow to do it on their own.

Pharmacorp’s revenue was $5.8M in 2024, increased to $20.9M last year. I expect with these acquisitions they will eclipse $40M quite easily this year, and a $100M year in 2027 does not sound like a ridiculous target at this point.

One of the things that impressed me the most was managements ability to improve these pharmacy metrics, and do it relatively out of the gate post acquisition. Not only do they have the pharmacy/prescription expertise in their management group, but these guys appear to be merchants too by improving the front of the store too. Once they get larger, this will give them additional buying power as well which should improve margins and marketing.

I’ve (half tongue in cheek) called them the potential Well Health of the Canadian Pharmacy market. That may turn out to be a rather idiotic comparison in a couple of years, but here are Well Health’s first three years of metrics as they were first getting started.

Revenue progression is rather similar, but Well burned a total of $12M through those initial first three years while losing $14M in net income. Pharmacorp’s metrics are trending much better than that.

Pharmacorp’s market cap is currently right around $100M. Well Health was $180M at the end of 2019 and $1.3 billion at the end of 2020. Everything of course was going crazy at that stage of Covid, particularly serial acquirers, but I think you get the picture.

November financials could get fun. Maintaining my borderline generous 3.25 star rating as they are progressing as I had expected.

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Disclaimer:

My intent is for my reviews to be a bolt on to due diligence that you have already completed. I receive dozens of review requests a week, therefore my own DD may be great or none whatsoever. Unless otherwise stated or implied, my opinions are on the financial performance of the company based on their most recent filings. I conduct these reviews to assist other retail investors whose research skills are limited when it comes to reviewing financial statements. I do not accept compensation of any kind from company’s I review.

Wolf FINS Reviews are intended to be informational and are based on personal opinion. They are not intended to be financial advice, and all readers are encouraged to perform their own due diligence prior to their investment decisions, including discussions with their investment advisor.

I did not anticipate writing reviews on three consecutive days. I was caught a little off guard by iFabric’s release of their Q2 financials after hours last night. Perhaps I shouldn’t have been, as their deadline was tomorrow. While it can be somewhat mentally draining to go back to back to back, it helps when you can write about two of your better performing recent picks on successive days. That, and coffee!

A Quantum Leap (not the terrible TV show) is a sudden, dramatic change, or a very large step forward. Early in my career I had an Executive Vice President who used to refer to this term quite often. Revenues that consistently increase in the mid single digits period over period are commendable. Quantum Leap improvement is where your business transforms into something entirely different overnight and delivers significant improvements within the metrics of the business.

This is where iFabric is today.

In mid December, the company was one of my annual Wolf Picks when it traded at $1.50. As of yesterday’s close of $5.21, that’s an increase of nearly 3.5x or 247% in the eight months since.

You could have had IFA at $1.50 all the way back in the summer of 2023. It’s been a long time since I wrote about the anatomy of a Wolf Pick back in 2024 referring to my selection of Kraken Robotics at $0.59, but the rationale for selecting the stock as an annual pick is similar. In the piece, I talk about striking when the iron is hot.

Back in the middle of June of 2024, I gave iFabric a decent review but felt they were priced appropriately and weren’t yet worthy of any of my investing dollars. They traded at $1.25 during that June ‘24 review. Eighteen months later, and a week before they became a top pick, it traded in that same $1.25 range.

The chart above is the main reason why. Now iFabric has performed very admirably since 2023 growing at a compounded growth rate of about 18%. But 2026 is poised to DOUBLE, or more. This is their Quantum Leap year, IMHO of course.

The company raised a lot of eyebrows with their record smashing Q1 which saw revenues increase by 288% and net income by over 4000%. That $27.5M in revenue from Q1 was 84% of the revenue they generated in their entire previous year. The stock price is up 75% in the three months since.

With great results, come higher expectations of course. In this what have you done for me lately world we live in, what has iFabric have for an encore in Q2? Let’s find out.

Balance Sheet:

iFabric’s balance sheet changed dramatically since their last quarter, thanks to a $28M bought deal less than a month after their financials were released. The company received $23M in gross proceeds while the top two insiders sold 1.35M shares for another $5M to institutional buyers.

Their new look balance sheet therefore looks much stronger than the one I referred to as weak, liquidity wise three months ago. They now have a current ratio of 4.2 (1.8 last quarter) which consists of $25.5M in cash, $11M in receivables, $16.9M worth of inventory and $1.3M in other short term assets against $13.1M in liability commitments due over the next year.

That A/R number was cut by 58% in the quarter which will dramatically impact their cash flow in a positive way, and inventory numbers are consistent with Q1.

iFabric has $5.1M of debt, all listed as current. $1.5M through their operating LOC and $3.6M in a payable on demand loan at 5.25%. While listed as current, the loan is amortized over 25 years and doesn’t mature until March 2029. Management expects to pay the minimum monthly payments of $22k over the next 12 months so “current” is just an accounting technicality.

Cash Flow:

Due to their record revenue quarter, A/R ballooned as expected and this had a very negative impact on their Q1 operational cash flow (OCF), burning $4.7M in the quarter.

In my Q1 review I pointed to selling to reputable retailers and excellent historical A/R management and predicted a reversal of fortune for the next couple of quarters cash flow.

In just one quarter, the company generated $10.5M of OCF bringing them back in the green for the year at $5.8M through six months.

A lot of activity in the financing section. $21M net proceeds from their capital raise and debt reduction of $5.1M.

After zero investments YTD, the company’s cash position has increased from $3.8M to $25.5. Liquidity is no longer a concern here.

Share Capital:

• 36.5M shares outstanding, with 20% dilution over the past year, all occurring in Q2 as part of their capital raise

• 1.8M options outstanding, all ITM. Surprisingly, 100k went unexercised in the period at $2.40

• Zero warrants with all 2.9M outstanding last year, expiring unexercised.

• Insider ownership now sits at 50%, down considerably with the private sale at the time of their raise

Income Statement:

It’s not anywhere close to the $28M quarter from Q1, but revenues did jump by 65% over last year to $9.6M. Gross margins were off significantly to the tune of over 700 basis points to 29.5%. Therefore gross profit dollars only increased by 33% on 65% more revenue.

I would like a word with whomever is responsible for the MD&A commentary. It states. “the 7% decrease in gross margin is primarily due the product mix for the quarter, as well as marketing support of approximately $650,000 provided to retail customers to promote the sale of company’s products, which was deducted from revenues as required under IFRS.”

The reverse is actually factual however. The $650k in marketing support, I’m assuming to Walmart is the primary reason, with the product mix sold playing only a very minor part of the rationale. If you add back the $650k to margin their rate would be 36.6%, only off by about 40 basis points instead of 700.

I could go into a long rant about why I feel the IFRS rules are wrong here. I feel it should impact operating expenses under marketing expense, but the end result would be the same on the profitability line, so I’ll leave it at that.

Total expenses were down 2%, but it would be disingenuous to lead you to believe they had a great operational leverage quarter. The company, like so many was impacted by tariffs, and they received $925k back in the quarter as part of the court settlement.

Without that credit, operational expenses grew by 37%. Selling costs doubled and G&A expenses rose by 20%.

Tack on an additional $545k in taxes and their net earnings for the quarter came in at $240k, a $430k turnaround over their loss in the comparable quarter of $190k

On a YTD basis:

• Revenues of $37.1M, up 188% over last year

• Margin erosion of 600 basis points to 31.8%

• Gross profit dollars up 141%

• Operating expenses up 27%

• Net income of $3.95M vs a loss of $100k despite a $1.7M additional tax burden

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Summary:

Certainly a bit of a mixed quarter but iFabric is still operating at a very high level.

If the company didn’t sell another cent worth of merchandise for the rest of the year, they would still end the year up double digits in revenue - 11%.

iFabric’s expense structure was inevitably going to change to support this significant increase in revenue, and unfortunately the big retailers like Walmart, Costco, and now Target command a lot of leverage over smaller manufacturers in their pay to play arena, and that can be temporarily impactful to gross margins.

While Quantum Leaps are transformational, they are not necessarily linear. Therefore continue to expect to see some lumpiness in their results. Anyone expecting $25M quarters from here on out was not doing their due diligence. Q3 is likely to shape up very well once again on the revenue line as they introduced a new line of scrubs into Target early in the quarter.

Interestingly the company is not going to be holding an earnings call for another week. You can register for that here.

We are approximately 45 minutes into trading after these earnings and the market significantly punished the stock sending it down by nearly 20% in the first few minutes. I acted upon that, buying the dip at the $4.20 support level. It’s already rebounded by 8% to $4.55. If it gets back to $4.65 that upward trend line will remain intact.

By buying the dip, you can assume I’m still very much bullish in iFabric despite the pullback today. I’m also leaving my rating at 3.5 stars.

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Disclaimer:

My intent is for my reviews to be a bolt on to due diligence that you have already completed. I receive dozens of review requests a week, therefore my own DD may be great or none whatsoever. Unless otherwise stated or implied, my opinions are on the financial performance of the company based on their most recent filings. I conduct these reviews to assist other retail investors whose research skills are limited when it comes to reviewing financial statements. I do not accept compensation of any kind from companies I review.

Wolf FINS Reviews are intended to be informational and are based on personal opinion. They are not intended to be financial advice, and all readers are encouraged to perform their own due diligence prior to their investment decisions, including discussions with their investment advisor.

After writing about the dangers of investing in a shitco like FOBI as I did yesterday, it’s always nice to come back and write about something you believe in.

The chart really tells the story. Chosen as my first ever mid-year pick back in February of last year, delivering a return of 776% in the last eighteen months and briefly touching nine bagger status last week.

Full disclosure, I do own slightly less shares from a few months ago. I bought heavily prior to their Q1 earnings when I called out a high conviction Buy Zone in my May What’s Wolf Watching article. It’s gained 59% since that piece. After initially investing at 14.5 cents, it had grown into a very large position. Less shares, higher dollar value. It’s how I manage size and risk and has nothing to do with my outlook on the company. Never fault a man (or woman) for taking profits.

Anywho, D-Box hit the streets with their Q2 earnings after hours last night. They did not knock it out of the park on the revenue line as they did last quarter, but profitability was extremely strong. If you read my July WWW, then you know my expectations were tempered coming into Q2.

It will be interesting to see how the market reacts today. Let’s get into the review, and see if they can maintain or improve upon the 4.5 score from their annuals in June.

Balance Sheet:

D-Box’s balance sheet remains cleaner than a nun’s conscience. They sport a current ratio of just over 5 and that consists of $17.8M in cash, $9M in receivables, $6.6M worth of inventory and $1.35M in other current assets overtop of just $6.9M in liability commitments over the next twelve months.

D-Box is far from the best when it comes to quarterly disclosures. No A/R aging report within their notes or MD&A. At year end their 90 days overdue did stand at 8% with half of that amount scheduled to be written off.

They are virtually debt free with just a small Canada Economic Development loan at 4% with $278k remaining and will be extinguished by December of 2027.

Overall very strong including their liquidity with their cash position alone covering all of their one year commitments by a factor of 2.6x.

Cash Flow:

Operational cash flow to last year was down rather significantly - 64%, generating $1.02M vs $2.83M in the comparable quarter.

Does this concern me? Not in the slightest.

Prior to working capital adjustments (yellow), OCF was up by 93% and all of their working capital adjustments (red) worked against them this quarter. They paid down their payables significantly from year end, and inventory and receivables grew. Some quarters this just happens. If this trends and I worry about it, I’ll let you know.

(if the colours don’t line up like I said - fuck off, I’m colourblind)

Also during Q1, DBO made minor investments of $244k, paid down $48k in debt, and bought back $386k in shares as part of their current NCIB.

Overall, their cash position improved by just over 1% during the first quarter.

Share Capital:

• 222.8M shares outstanding, down about 600k from their last report due to buy backs

• 15.8M options outstanding including 2.8M granted at 92 cents in the quarter - all are ITM but none expire for two years

• 420k SAR’s and 1.9M RSU including 450k granted in the quarter

• 6% insider ownership with 16% owned by tutes.

• Mixture of insider buying and selling with the audit chair and largest insider, reducing his holdings by 38% over the past year

Income Statement:

After a 70% revenue increase in Q4, the first quarter was less of a headline maker, growing by just 2.8% to $13.4M. But don’t turn your head away, as it gets a lot better underneath that.

Gross margin grew by 300 basis points to 59.1% which in turn, grew their gross profit dollars by 8.3%. Total operating expenses were down by 5.6% despite the fact they had a $70k bogey in foreign exchange. Administrative expenses were down by more than 20% with additional savings in R&D of 7%. Only their selling and marketing bucket grew in the quarter, which was up by 5%.

Financing expenses were down on their small amount of debt, and interest income grew from their increased cash position.

That all translates very well to the net income line, delivering $2.94M, vs $1.95M, an increase of 51%.

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Summary:

Early indications are we could be heading towards a morning dip as growth investors may be getting a little weary about the top line number. Wankers.

As I mentioned in my recent WWW article, the SIM business still makes up a rather significant portion of D-Box’s total revenue. Investors don’t have much visibility to this segment, and it is rather lumpy. If D-Box has an Achilles heel in their quarterly results, this is probably it.

The positive side is their royalty revenue was a record $5M, up 25%. This is going to be the gravy and the driver of D-Box’s successes or failures. That comes from bums in seats, and the death of the theatre experience has been highly exaggerated, as witnessed by recent numbers. They in fact have been surging, particularly in the premium segment which D-Box resides.

Cineplex is spending significant Capex in 2026 for premium experiences including additional D-Box screens and the company recently got their foot in the door with B&B and Marcus theatres in the USA.

DBO currently trades at about a $260M market cap and with these results equates to about a 14 P/E.

The bad news after a run like D-Box has had over the next eighteen months is you come up against those tough comps - and their next two are rather daunting. More expansion on the theatrical installs will be needed to maintain this momentum, particularly when they need to offset the lumpiness of their SIM businesses.

For those reasons, D-Box is a hold for me and not a buy right here - even with this mornings dip. At least not with my position sizing.

Maintaining the 4.5 star rating.

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Disclaimer:

My intent is for my reviews to be a bolt on to due diligence that you have already completed. I receive dozens of review requests a week, therefore my own DD may be great or none whatsoever. Unless otherwise stated or implied, my opinions are on the financial performance of the company based on their most recent filings. I conduct these reviews to assist other retail investors whose research skills are limited when it comes to reviewing financial statements. I do not accept compensation of any kind from company’s I review.

Wolf FINS Reviews are intended to be informational and are based on personal opinion. They are not intended to be financial advice, and all readers are encouraged to perform their own due diligence prior to their investment decisions, including discussions with their investment advisor.

Almost two months have transpired since my most recent review of Baylin Tech (attached for your potential perusal below). It was less about reviewing their Q1 financials and more of a look at their splash acquisition of Kaelus AB out of Sweden. A big hello to my 56 subscribers from the land of the Tre Kroner by the way.

The latest Q1 FINS preceded that acquisition, and due to that I left the company unrated. While these financials only have one month of revenue from the combined entities, I’ll commit to giving it a rating this time around and this comes before I have delved into their numbers.

The stock is still slightly up from their Q1 financials, but down 16% from the acquisition announcement. My last review came on June 11th when the stock traded at 26.5 cents. Eleven days later the stock was up by 58%. Since then, it has given it all back, so I have some regrets for taking that starter position and holding onto it for that duration as it could have turned into a phenomenal little swing trade.

Baylin released their latest numbers after hours on Wednesday and the stock fell 3.7% yesterday (Thursday).

While the stock may be down since the acquisition, the same cannot be said for their valuation due to the significant dilution that came with buying Kaelus, going from approximately $41M to a current $73M market cap.

So let’s get into the new look Baylin Technologies and see if we can slap a rating on this bitch this time around.

(Free release on Aug 13th)

Balance Sheet:

When we last looked at Baylin, they had a dreadful looking current ratio of under 0.8. Under the combined entity that has improved to 1.1, but their liquidity still remains somewhat lacking.

They ended Q2 with $12.5M in cash, $29.8M in receivables. $28M worth of inventory and $15.1M in undefined other current assets overtop of $78.2M in liabilities due over the next twelve months. A 1.1 current ratio is what I would define as borderline acceptable. A little more than half of their current assets are made up of less liquid inventory and these “other current assets”. When you take their more liquid assets of cash and A/R, they only account for 55% of their one year commitments.

Above is a breakdown of those one year commitments and that looks rather daunting when the company is only sitting on $12.5M in cash and nearly $30M in receivables, leaving a shortfall of nearly $36M. That long winded line of “Short term portion of other long term liabilities” relates to deferred cash payments due to the owners of Kaelus AB. $14M of that is due quite soon, $11.2M by mid November and $2.8M a month later.

We don’t know exactly what is in that other current asset bucket, but it could be additional assets with more liquidity like restricted cash from Kaelus. If it is, that could improve things a great deal.

Of course, all of those above concerns can be rectified if they have strong operational cash flow (OCF) numbers. Right?

Cash Flow:

Well, so much for that as through six months BYL has burned $3.2M in OCF through six months with $3.8M burned in this most recent quarter.

They also had net cash outflows of $2.2M from the acquisition, increased their debt by approximately $4M and received $2M from the issuance of preferred shares.

Overall, they sit with approximately the same amount of cash they began the year with.

We’ll get back to this later I’m sure.

Share Capital:

• 281.4M shares outstanding, 84% dilution from where they began they year - all from the acquisition which made up about a third of the total purchase price

• 6.2M DSU’s 2.26M RSU’s, and 2.5M PSU’s outstanding under their fairly rich 12% Omnibus plan

• The company’s stock option table is the longest and least useful one I may have ever seen presented. Currently 11M outstanding with 6.8M ITM, but just by a penny.

• Insider ownership a bit of a bouncing ball since the acquisition. Approximately 73% insider ownership (primarily Jeffrey C. Royer - Board chair) with minimal institutional investors of under 2%

Income Statement:

Revenues came in soft, down 2% to the comparable period despite the acquisition being in place for a month. Gross margins were up by 80 basis points to 47.1% leaving gross profit dollars a little worse than flat.

Expenses were up by nearly 30%, the majority of which were related to the acquisition. When removed, total expenses rose by 4.6%, driven by a 13% increase in G&A expenses. Selling and marketing decreased by 6% while R&D costs remained flat to last year at $3.1M.

After increased financing expenses, up 150%, and income taxes, Baylin suffered a $3.2M loss in the quarter compared to $1M in positive net income a year ago.

Through two quarters:

• Revenue down 7.8% from $41.3M to $38.1M

• 30 basis points of margin improvement to 44.8%, gross profit dollars down 7.4% as a result of less revenue

• Without acquisition costs, expenses were down 3.3%, but up 8.8% when included.

• Net loss of $5.5M vs $1.05M last year.

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Summary:

Other than slightly improving their gross margin, there isn’t a lot of positive to say about their P&L, and for that matter, the entire set of financials here. The margin didn’t even come around due to something positive the company achieved, but the result of tariff refunds the company received.

On the plus side is their backlog which now sits at over $60M compared to the $20M from the beginning of the year. One of the other big pieces of their news release focused on restructuring their debt moving from RBC to a private lender, SAF Group.

Baylin had approximately $11M drawn on their RBC loan of an available $15M prior to moving to the new loan with SAF for potentially $30.9M. So far they have received $14.6M of that amount which was used to pay off RBC and the balance for the acquisition.

They also cleaned up the cap table putting the convertible debentures and preferred share behind them, but again at the expense of some additional dilution.

In a lot of cases (preferably) when you have debt restructured is to see your interest rates improve. That is not the case here as they move from an RBC rate of approximately 7% to a new rate of 10.4% (CORRA - 8% I’m assuming based on available information). They are to receive at least $6M more on this loan per the company’s earnings release. When you factor in the $14M they’ll need for future considerations on the Kaelus acquisition, it’s not hard to see them maxing this $30.9M or close to it in short order giving their current liquidity situation.

The big question is does the combined company with the increased backlog offset these rather poor financials and fundamentals along with this restructured, more expensive debt? And do they look more attractive?

For me the answer is not yet. Three more months until we get a full quarter of the combined Baylin/Kaelus company. Kaelus’ 2024 actuals made them appear to be a better looking company than Baylin was in 2024. By that measure, Q3 should look better than this one here. The question is by how much?

Right now, this is no better than two stars, and even that feels somewhat generous.

What will I be doing with my starter position? I’m actually not sure yet.

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Disclaimer:

My intent is for my reviews to be a bolt on to due diligence that you have already completed. I receive dozens of review requests a week, therefore my own DD may be great or none whatsoever. Unless otherwise stated or implied, my opinions are on the financial performance of the company based on their most recent filings. I conduct these reviews to assist other retail investors whose research skills are limited when it comes to reviewing financial statements. I do not accept compensation of any kind from companies I review.

Wolf FINS Reviews are intended to be informational and are based on personal opinion. They are not intended to be financial advice, and all readers are encouraged to perform their own due diligence prior to their investment decisions, including discussions with their investment advisor.

My last review of Cematrix was six months ago, after their 2025 annuals - an upgraded review to 3.75 stars. In that article, I referred to their past twelve months as a one year heater. If you go further back to my March 2025 What’s Wolf Watching where I called out a Buy Zone, the stock is currently up 215%.

I have a busy upcoming weekend on the golf course, so let’s skip the typical preamble bullshit and see what Cematrix has been up to over the past two quarters.

Balance Sheet:

As I have just come to expect over the past couple of years, CEMX sports a very solid balance sheet. They have a current ratio of 5.4 that consists of $16.2M in cash, $13.5M in receivables and $1M of other short term assets over top of less than $6M in liability commitments over the next twelve months. Their cash position alone covers those liabilities alone by a factor of more than 2.7 so liquidity looks excellent.

$2.5M of the company receivables are within holdbacks. As for the remainder, it does look much cleaner than it did six months ago with greater than 90 days shrinking from 19% to 6%. Their terms are 30-90 days and they don’t distinguish which are overdue, so while their table above is good disclosure, it’s not perfect. I have beaten them up a little bit in past reviews so it’s important to note the improvements here.

In terms of long term liabilities they have a small equipment loan under $1M and $1.6M in deferred liabilities to the tax man.

Very good shape overall.

Cash Flow:

Through six months, Cematrix has been an operationally cash flow producing beast compared to last year, generating $5.7M in OCF vs burning $875k at the same point last year. Receivables spiked in the quarter due to their great sales performance which makes their Q2 OCF of $1.1M look soft compared to their first quarter of $4.6M. I’ve yet to look at their P&L but I can already tell it’s going to look great based on this.

Very little occurring within investing and financing activities YTD, but the company has repurchased a small amount of stock and made minor investments of under $450k, and reduced that equipment loan by $324k YTD.

Overall CEMX has improved their cash position by 36% from the start of the year.

Share Capital:

• 149.4M shares outstanding, 275k less shares outstanding from the start of their fiscal year

• 690k shares repurchased through their NCIB YTD

• 8.2M warrants WERE outstanding as of their quarter end, but were set to expire two days ago. 7.3M were well out of the money at 60 cents with 880k of broker warrants at 51 cents. Hard to imagine any of these were exercised.

• 5.3M options, all ITM between 18.5 and 43 cents. The company does not list an expiry table and I’m too lazy to go digging for one.

• 3.1M RSU’s

• Minor insider ownership of 3.5% with 3% held by institutions (per Yahoo Finance)

• Insiders have been allergic to buying in the open market

Income Statement:

After a decent quarter in Q1 on the top line when Cematrix posted a 10% increase over last year, the company went deep to straight away center field with an $18.7M revenue quarter, 76% above what they did in the comparable period.

Those revenues did come at the expense of some margin however, losing nearly 400 basis points to last year coming in at 35% vs 38.9%. Therefore on 76% more business, they generated 59% more gross profit dollars.

What Cematrix lost in margin, they made up for in operational leverage, actually spending 5% less in expenses - very impressive when you generate that large of a revenue gain. That leverage extends to their YTD totals as well.

At the bottom, they generated $3.5M in net income for the quarter, 18.6% of revenue and 161% better than last year.

On a YTD basis through six months:

• Revenue of $26M, up 51%

• 450 basis points of erosion in gross margin - 27.8% vs 32.3%

• Gross profit dollars up 30%

• 7% reduction in operational spend

• Net income op $2.3M vs $425k

Since I’ve discussed their margin erosion, it’s important to note the company’s rationale from their MD&A:

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Summary:

While the stock gained a penny yesterday after releasing these earnings the night before, the volume certainly looked a little muted compared to previous earnings periods.

Were investors not entertained?

The company had a record second quarter and a record first half. It was also their best single quarter the company had since Q3 of 2023.

When I put CEMX in a Buy Zone sixteen months ago, their market cap was around $26M. That now sits at $78M. Have they plateaued or is there more upside?

Backlog is down 9% from the beginning of the year and 12% from their previous quarter end so that could explain some of the markets rather uninspiring response on what were excellent numbers. In addition, the company is also up against much stronger numbers in the back half of the year and this piece of commentary within the MD&A suggests they will not have a repeat significant increase in Q3 as they did here. That would also be a QoQ sequential decline - that is never going to get retail investors juices flowing, even in a lumpy revenue business like this.

The CEO was also a little non committal on the great operating expense leverage they have gained, and whether or not that would continue. You can find the whole transcript of their earnings call here.

They currently trade at a 13.2 P/E at 8x cash flow and 6.7 EV/EBITDA numbers. So with the company projecting flat Q3 revenue, my conclusion is the company is pretty close to fair value - therefore Cematrix remains more of a hold than in a buy zone situation.

Insiders could step up to the plate more often and put their money where their mouths are, that’s for sure.

Maintaining the 3.75 score.

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Disclaimer:

My intent is for my reviews to be a bolt on to due diligence that you have already completed. I receive dozens of review requests a week, therefore my own DD may be great or none whatsoever. Unless otherwise stated or implied, my opinions are on the financial performance of the company based on their most recent filings. I conduct these reviews to assist other retail investors whose research skills are limited when it comes to reviewing financial statements. I do not accept compensation of any kind from companies I review.

Wolf FINS Reviews are intended to be informational and are based on personal opinion. They are not intended to be financial advice, and all readers are encouraged to perform their own due diligence prior to their investment decisions, including discussions with their investment advisor.

About a year and a half ago, I decided that simply choosing annual picks for the following year sometime in mid December was leaving potential opportunities on the table the rest of the year. That’s when I decided to launch mid year #SealOfApproval picks for those special opportunities that arise.

D-Box Technologies ($DBO.TO) was my first in February of last year and as of today that has delivered a return of 762%. Fast forward to February of this year and Biorem became my first mid year pick of 2026 at $2.42. It is currently up 25% from that selection, peaking at 48% or $3.57 in May after their first quarter was released which became a “sell the news” event. A move which I was puzzled by particularly since those financials received an upgrade to four stars and their second consecutive upgrade as well.

Prior to their financials coming out this morning, they traded at an 11.3 P/E with an EV/EBITDA ratio of just 5.9.

The headlines appear very impressive with a 66% revenue increase and increasing their profitability by over 260%. So, could we be looking at a company about to set new all time highs ($3.80), or are there some fly’s in the ointment we must consider?

Let’s find out.

(Free release scheduled for Aug 4)

Balance Sheet:

Biorem has a current ratio of 3.5 (up from 3.3 last quarter) consisting of $7.2M in cash, $16.5M of accounts receivable, $2.1M worth of inventory and $7.25M in other short term assets against just $9.3M in liabilities due over their next twelve months.

Cash is down, receivables up, payables down, prepaids and inventory up suggest the next section (Cash Flow) may not look so great. If I have criticism regarding Biorem, it’s that their disclosures within their financials are on the soft side.

When revenues are up nearly 60%, it’s perfectly reasonable to expect that A/R would move in a similar direction. It is, up 39% from their year end six months ago.

The only time BRM discloses an A/R aging report is at year end. The one above is not without some problems, therefore I would be much more comfortable seeing this on a more regular basis.

Biorem has $1.56M remaining on a $4M term loan ending in December of 2028 and an untapped $3M line of credit.

Cash Flow:

As mentioned, their cash flow doesn’t look great with $3.95M of operational burn YTD compared to generating $3.35M at this time last year, a negative $7.3M turnaround.

You will notice however that prior to working capital adjustments, their OCF is up by 71% to $2.43M. Due to paying down their payables and increases in prepaids and the growth in A/R, all contributed to the poorer than ideal result. This should, assuming their A/R is low risk, will turnaround in upcoming quarters. Their burn rate so far this year is $1.13M in Q1 and $2.82M in Q2.

Share Capital:

• A bit of a misstep here within their MD&A. The period end is actually June 30th, so it looks like a cut and paste error from their last quarter. The number of outstanding shares is approx 16.2M shares as of the actual date with some options being exercised just prior to quarter end.

• 3.1M options outstanding, all ITM

• Announced an NCIB in June. Bought back a limited number of shares over a few week period in September. Not much of a commitment here - more like a game of just the tip to see how it feels.

• Just 2.5% insider ownership, all from the CEO.

Income Statement:

As you already know, another banger of a quarter coming off Q1 when they had a 44% increase. They bested that with 66% going from $9.4M last year to $15.7M this year. In addition, gross margins were up by 430 basis points to 31.3%, therefore generating 93% more gross profit dollars on 66% more business. That’s a sexy combo.

Operating expenses were up by 46% which I’ll call good conversion. G&A costs were extremely well controlled , down 17% compared to last year but sales and marketing costs rose by 159%, highly influenced by sales commissions in the period. That still awards them the Wolf Trifecta for Q2.

Even with income taxes increasing by 2.7x in the quarter, net earnings came in at $1.98M, 12.6% of revenue and 166% better than the $745k they delivered in the comparable quarter.

On a YTD basis:

• Revenue of $22.5M, up 59%

• Gross margin of 28%, up 220 basis points with gross profit dollars up by 72%

• Operating expenses grew at half the rate of revenue - 30%

• Net income of $2.18M, an increase of 180%

A double Wolf Trifecta for their quarter and YTD results.

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Summary:

Outside of some cash flow concerns which will likely turn out to be temporary, Biorem has knocked it out of the park on almost every other metric through their first six months of 2026.

In my February article calling out Biorem as a mid year pick, I had this to say.

The Q1 financials did indeed become a sell the news event with the price getting awfully close to my $3.73 target when it topped out at $3.57, and investors received a 48% upside compared to my estimate of 54%. Not bad I’d say.

The unknown for me then was would their order intake match their revenue and maintain that record backlog? That was going to be the determining factor for me on how long to hold Biorem.

So far they have been able to achieve that with $14.8M of order intake, leaving their backlog at $75.5M, just shy of their record $77M. They are also gaining traction across all geographies that they operate in and have been successful in both their construction and service segments.

My $3.73 price target back in February was based on $50M of TTM revenue and $5M in net income. Today they sit at $50.7M in revenue and $6.2M net income on a TTM basis. At 12x earnings that would put them at $4.60/share. I’ll discount that by 10% due to their cash flow situation which brings a new price target of $4.15/share.

That’s a 37% upside from this mornings open and 71% from the original pick.

Maintaining the four star review as well.

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Disclaimer:

My intent is for my reviews to be a bolt on to due diligence that you have already completed. I receive dozens of review requests a week, therefore my own DD may be great or none whatsoever. Unless otherwise stated or implied, my opinions are on the financial performance of the company based on their most recent filings. I conduct these reviews to assist other retail investors whose research skills are limited when it comes to reviewing financial statements. I do not accept compensation of any kind from company’s I review.

Wolf FINS Reviews are intended to be informational and are based on personal opinion. They are not intended to be financial advice, and all readers are encouraged to perform their own due diligence prior to their investment decisions, including discussions with their investment advisor.

The first seven months of AirIQ’s fiscal year received a lot of fanfare sending the stock up 86% but they have been in retreat mode since hitting their 52 week high back in February, giving back 30%.

My previous review came just after hitting that 66 cent high and I rewarded them with a handsome 3.75 star review. At the time I said if you were holding cheaper shares it was probably worth the hold but due to the lack of liquidity in the stock, there appeared to be some significant risk taking a position above 60 cents.

In my more recent July What’s Wolf Watching article, I put AirIQ in a conditional Buy Zone between 47 and 49 cents. It never did get there leading into earnings - but it is now. So are this results still worthy enough of considering taking a position here? Let’s find out.

Balance Sheet:

A very solid current ratio but overall consist of some pretty minuscule numbers. Their balance sheet consists of $1.6M in cash, $600k in receivables, $410k worth of inventory and $165k in prepaids overtop of $1.1M in one year financial commitments within A/P and accrued liabilities. AirIQ is not only debt free, but long term liability free as well. Their cash and receivables also cover their liabilities by a factor of more than two, so liquidity is strong as well.

Cash Flow:

AirIQ was operationally cash flow positive for the year, generating $1.29M, an increase of 30% over last year.

Relative to their size, they invested heavily with $2.7M of cash outflow within investing activities - $850k acquiring customer contracts, $460k investing in software and $1.36M in rental units.

They bought back $200k in shares and received $78k from options during the year as well. Due to the investments their cash position actually depleted by about 50% during the year despite the strong operational cash flow performance.

Share Capital:

• 29.5M shares outstanding with virtually no dilution over the past years. Share buybacks have offset stock option exercises for the most part.

• 1.75M options outstanding. All ITM but none expire in the next two years

• 611k repurchased in 2025 and 1.12M over the past two

• 41% insider ownership but no activity in the open market thus far in 2026

Income Statement:

Revenue increased to $6.5M during their 2025 fiscal year, up 17%. Gross margin was slightly off by 140 basis points but still a very strong 59.8%. Gross profit dollars therefore rose by 14.5%.

The company converted well within their operational spending which grew by 6.7%, less than half of the growth rate of their sales and GP.

They look excellent on the income before other expenses line, $974k vs $667k, up by 46%. Unfortunately, there were a few hiccups beneath that. $214k in additional tax re-assessments, a $114k bogey in foreign exchange to last year and less interest income on their cash position, all contributed to a 50% reduction in their net income compared to last year - $104k vs $203k.

On the quarter, revenues were up by 40% with some additional slippage in margin and operating profit increased by 44%. Unfortunately, the tax re-assessment and other items hit hard in Q4 resulting in a net loss of $150k.

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Summary:

In my last review, I referred to AirIQ as small potatoes and when you have one little item like their tax re-assessment, that can put a damper on a good year and that appears to be the case here. After their third quarter, the company’s YTD net income was 55% greater than last year. At year end, they achieved half.

That 32 P/E ratio I discussed last quarter just turned into 144 as a result. They do look more attractive on an EV/EBITDA ratio at 8.8 and trade at 11.3x cash flow.

One of the most attractive parts about the company is their recurring revenue model which makes up 91% of their total revenue. That sets them up for a couple more solid revenue quarters to begin their 2026 year.

One of the lesser attractive things about AirIQ is the stocks liquidity. It can go days without trading a single share. Their largest volume day was 76k shares traded in the past year, and only traded 143k shares in the past thirty days.

I’m not anti illiquid stocks, but they have to impress me a little bit more to take that leap due to the increasing risk.

I continue to contend that AirIQ is a solidly run business, but they don’t quite meet the risk/reward criteria for me. Slight downgrade to 3.5 stars due to the valuation metrics getting slightly more expensive here.

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Disclaimer:

My intent is for my reviews to be a bolt on to due diligence that you have already completed. I receive dozens of review requests a week, therefore my own DD may be great or none whatsoever. Unless otherwise stated or implied, my opinions are on the financial performance of the company based on their most recent filings. I conduct these reviews to assist other retail investors whose research skills are limited when it comes to reviewing financial statements. I do not accept compensation of any kind from companies I review.

Wolf FINS Reviews are intended to be informational and are based on personal opinion. They are not intended to be financial advice, and all readers are encouraged to perform their own due diligence prior to their investment decisions, including discussions with their investment advisor.

A 2024 Wolf Pick at 43.5 cents to a seven bagger at $3.14 last October only to retreat to lows of $1.06 just five months later. Since then GSI has been a pretty good swing trade moving between $1.10 and $1.60 on three separate occassions.

Unfortunately (for me), I think I made more money swing trading Gatekeeper recently than I did on the original pick as I exited the stock prior to their tremendous news flow in the middle of last year.

The news flow has been great for the company over the past year but the same cannot be said for their financial performance. In 2023 Gatekeeper delivered 10% net profit margin on $28M in revenue. In 2024 that slipped to 5%, and last year they lost $3.1M in net income on declining revenue.

I did not review Gatekeeper’s Q2 with my last review coming in January after their Q1 results. Those results were rather horrific with their worst top line performance since Q1 of 2023, poor margin, increased operational costs, a $1M net loss and a whopping $9M of operational cash burn. That review received a downgrade all the way down to 2.5 stars.

Most investors knew the top line would eventually come around with the plethora of new contracts announced last year and thus far into 2026. Recently, in my July What’s Wolf Watching article for paid subscribers, I called out a $1.10 - $1.18 Buy Zone and had the following to say:

Astute investors had a brief opportunity last Friday when the stock dipped into that Buy Zone. After their results were announced Tuesday evening, the stock bounced 17% for a total gain of 25% if you were able to catch that Friday dip.

So where does Gatekeeper go from here. While the stock gained 17% yesterday it had trouble getting past $1.60 resistance - the fourth failed attempt to do so since February. Is it headed backwards once again, or are these results enough to start working it’s way back to set new all time highs?

Balance Sheet:

Gatekeeper has an excellent current ratio of over 12 that consists of $7.2M in cash, $14.5M in accounts receivables, $17.4M worth of inventory and $2.3M in prepaids over top of just $3.36M in current liabilities (def revenue removed) due over their next twelve months.

Their current ratio which is a better liquidity measure is not quite as impressive as just 17% of the company’s current assets are in cash, but it still exceeds their one year commitments by a factor of greater than two.

Their accounts receivable does present somewhat of a yellow flag, and the company has never been great with full disclosure when it comes to their A/R. On a YTD basis their revenue is up by 39% while their A/R is up by 83%. That could be just timing differences (late quarter revenue recognition) but there is one note in the MD&A which is troubling.

29% of their receivables are 90 days past due, and that percentage was only 15% three months ago. When nearly 1/3rd of your customer base is not only paying their bills late, but very fucking late, at best it presents cash flow problems and at worst can result in large write-offs. 29% of their A/R works out to be greater than $4.2M. Their credit manager needs to start banging some heads.

Outside of that, the balance sheet is relatively clean, and includes zero debt. In fact their only long term liability commitments are $190k in future lease obligations.

Cash Flow:

I already mentioned that they had a terrible cash flow quarter in Q1 with $9M in operational burn. They followed that up with $4.5M of OCF burn in Q2 and another $6M here in Q3 for a total of over $19.3M through the first nine months of the year.

Every working capital adjustment is going the wrong way here. Receivables, which I discussed, a $5.5M investment in inventory, and $9M in prepaid expenses and reducing their accounts payable.

Paying your bills on time while your customers are not is a terrible cash flow combination and this is responsible for $14.5M of their burn problem. While revenues are up, they are not getting sell through turnover on their inventory. In fact, it is up again from their second quarter by another $2.7M, and up 234% from this time last year.

The biggest reason their balance sheet is in such great shape is due to the $13.5M (gross) raise of capital back at the start of their fiscal year in November. That raise was also notably done at $2.10 share creating some bagholders who are currently down 26% on that cash outlay. That raise came with nearly $1M in costs, they received $230k into the treasury from options and have made minimal asset investments of $158k YTD. Overall their cash position has depleted by nearly half from the start of the year despite that large influx of cash in November.

Share Capital:

• 111.2M shares outstanding, 12% dilution over the past year, mainly due to the November raise with 920 options exercised YTD

• 3.9M options outstanding, all but 100k ITM. About 1.1M should be exercised within the next year

• Minimal 5% insider ownership with small institutional participation (1.5%). Retail investors definitely control the show here

• Only insider activity in the past year was the CEO selling 4M shares last September at $1.60

Income Statement:

Third quarter revenues were excellent at $12.5M, a 68% increase over the comparable period. Gross margins were fantastic as well, rising by 400 basis points to 53.1%, resulting in an 82% growth in gross profit dollars.

Operating expenses were also reasonably controlled, growing by 23% on 82% more GP dollars. All of their three main expense buckets, G&A, Selling and Marketing and R&D rose by similar amounts between 20% & 25%.

That is all going to result in a tremendous swing in their profitability. Gatekeeper also had a $600k birdie to last year in foreign exchange so their net income for Q3 came in at $2.3M, compared to a $300k loss a year ago - quite the dramatic turnaround and as a result, a Wolf Trifecta on the quarterly results.

YTD Performance:

• $28.8M in revenue, an increase of 39% over their first three quarters

• 47.8% gross margin, 370 basis points higher than last year, delivering 51% more gross profit dollars

• Converted well in operating expenses, growing by 24% giving them a double Wolf Trifecta

• A total net income turn around of nearly $2M, $1.03M in net income vs a loss of $920k last year

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Summary:

After six straight quarters with a net loss, Gatekeeper reversed that trend in a big way delivering over $2.3M of profitability and net income of of two cents/share.

The question going forward for them is whether or not this is a new inflection point of more regular results like this to come. The opportunity is certainly there. Given their 2025 results and the first two quarters of 2026, I’m not sure I agree with the slides title below, but the contract wins announced this year does give some indication that the top line will look solid in future quarters.

Without knowing a company’s close rate or how they manage their CRM, I don’t take a lot of stock in company’s pipeline numbers, but for what it’s worth that exceeds $300M. So in addition to the contract wins, the North American future opportunities are massive.

Given that Gatekeeper already has relationships and contracts in some of the major N.A. metropolitan areas (Toronto, NYC, Philadelphia, Atlanta), that provides them with a competitive advantage for going after other large cities bids for mass transit and school bus fleets.

When GSI first started announcing some of their large contract wins last year I did have questions on whether or not they had to pull their pants down when it came to margins. So far that doesn’t appear to be the case. Operating costs have also begun to stabilize in the $4.1 - $4.3M per quarter range. Therefore if they continue to keep pumping out $12M+ quarters, their bottom line should continue to deliver.

Looking at it from that purely bullish lens would be ignoring some of their other challenges however, and their largest one right now is the sorry state of their cash flow. Their accounts receivable and inventory numbers are the current two pain points. They need to collect better and on time and need better sell through on inventory levels. Their $21M TTM burn is unsustainable. The good news is this can turnaround rather quickly, the bad is a potential raise in two quarters if it doesn’t, and that would be managerial incompetence with a current ratio of over twelve!

So what do we think of the current $175M market cap valuation? The current fundamentals suggest they still have a lot of growing to do just to justify that number. 3.6x TTM sales, unprofitable on both the Net income and EBITDA lines and delivering a negative 4% ROE. That doesn’t exactly scream undervalued. Even if one were generous and extrapolated this record quarter to annual numbers, you would still get 3.5x TTM sales and a P/E of over 18.

Therefore I feel they still have a lot of work left to do before they can think about challenging new highs any time soon, a number that they are 50% off currently. Unfortunately I was unable to listen to yesterday’s call to see if any of my concerns were addressed and the replay is not yet available.

Regardless, this set of financials is definitely upgrade worthy. They have a four star P&L, but that has to be reduced significantly due to their cash flow issues.

3.5 stars.

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Disclaimer:

My intent is for my reviews to be a bolt on to due diligence that you have already completed. I receive dozens of review requests a week, therefore my own DD may be great or none whatsoever. Unless otherwise stated or implied, my opinions are on the financial performance of the company based on their most recent filings. I conduct these reviews to assist other retail investors whose research skills are limited when it comes to reviewing financial statements. I do not accept compensation of any kind from companies I review.

Wolf FINS Reviews are intended to be informational and are based on personal opinion. They are not intended to be financial advice, and all readers are encouraged to perform their own due diligence prior to their investment decisions, including discussions with their investment advisor.

If you’re familiar with my work, then you are likely aware that PesoRama has not exactly been a favourite of mine. They received a one star review in my latest, and most recently identified them as a Danger Zone stock leading into these financials in my June What’s Wolf Watching piece on June 16th, telling investors to “save their Pesos”. The stock is down 18.5% since, and 34% in the past month.

Longer term investors have fared better as the stock is up 231% in the past year. The average daily volume increase has been very noticeable recently also, almost suspiciously since their April 23rd raise. That was done at 35 cents and yet the stock doubled from 40 to 80 cents in the next thirty days. Hard to explain.

Over the past year, PesoRama has expanded by about a dozen locations throughout Mexico. Post financials, the company has tried to clean up some of it’s debt problems which we’ll get into later.

So, should you continue to keep your pesos in your pocket when it comes to this Mexican dollar store chain? Let’s find out.

Balance Sheet:

As of April 30th, an important distinction given the post financials activity, PESO maintained a very unattractive current ratio and liquidity situation. The current ratio stood at .64 and consisted of $10.2M in cash, $10.8M worth of inventory and $2.8M in other short term assets against $37.1M in short term liabilities. Those liabilities included $19.8M of a revolving loan with Third Eye Capital which I wrote about extensively in my last review. Most recently this loan came with a 18.5% minimum interest rate, 15M warrants at 14 cents, closing fees, due diligence fees, and monitoring and standby fees. It was one of the worst loan situations I’ve ever reviewed. Only the only from VSBLTY with high interest rates from insiders tops it.

But as of a couple of weeks ago, the company closed a convertible debentures financing which raised just under $20M (net after $1.05M in commissions). These three year debentures carry an interest rate of 9% and will convert at 91 cents in mid June of 2029. Those funds were used to extinguish the Third Eye Blind debt.

So their balance sheet will certainly look better than it currently does in September when they report their Q2. Even with that $19.8M loan removed, liquidity is still concerning with their cash balance still about $7M shy of their accounts payable and lease costs for the next twelve months. This is of course after a $10M raise back in April.

If they’re operational cash flow positive, it would alleviate some of those concerns.

Cash Flow:

Alas they are not OCF positive, burning $415k in their first quarter. This compares with generating $700k of cash flow in the comparable quarter. Prior to working capital adjustments it’s about $500k worse, only looking as good as it is due to $3.5M in accounts payable growth during the quarter. We’ll touch on this again later.

During Q1 they spent $1.8M in investing activities - the majority of which was utilized on capex for leasehold improvements for new locations.

They received $10.3M into the treasury from the 35 cent raise and warrant exercises in the quarter, and made $950k of interest payments.

Overall, their cash position more than doubled during the quarter to $10.2M from the $4.85M they started with.

Share Capital:

• 202.4M shares outstanding. 18% dilution in Q1 alone and 111% dilution in the past twelve months

• 84.4M warrants outstanding - ALL ITM.

• 20M options - 13.5M ITM with another 2M at 55 cents (stock currently at 53)

• $21M new convertible debentures post financials converting at 91 cents in June of 2029. (now publicly trading under PESO.DB)

• 3.5% insider ownership with a mix of insider buying and selling in the past twelve months

• Fully diluted float just including ITM equities is 300.3M shares with an implied market cap of $159M

Income Statement:

Revenue increased by 36% in Q1 to $7.5M compared with $5.5M last year. Gross margin declined by 240 basis points from 35.1% to 32.7%. Therefore on 36% more revenue, PESO generated just 27% more gross profit dollars.

Cash burning expenses jumped by 44%, more than both their revenue and gross profit increases. Non cash burning operating expenses (Depreciation and Amortization) increased by 58%. This is a bad combination resulting in their operating losses increasing by 76% ($2.41M vs $1.37M). Tack on $1.44M in financing costs and that takes their net losses to $3.86M vs $3.1M. Tack on another $455k in forex losses and their comprehensive losses increased to $4.31M vs $3.03M.

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Summary:

Sell more, lose more is far from optimal and that is what we have here. Other than the revenue increase, almost every comparable metric was worse in Q1 of 2027 compared to last year. You cannot have the rate of your operating costs exceed that of your gross profit, and theirs was off significantly, and in most of their major spending buckets.

I also never like to see related party expenses rise like this, with the majority of the increase from using legal services with ties to one of their directors.

In fairness to PESO, they did not get a substantial revenue benefit from the four new locations in Q1. All four opened in the back half with the most recent opening on the final day in the quarter.

But by the same token, they ended Q1 of 2026 with 25 locations and had 31 open at the beginning of this years Q1. Even without those four new Q1 stores, this revenue figure might appear to be light. Adding to this potential theory is the company did not announce same store sales figures like they usually do. They reported traffic was up 19%, but no mention of SSS. This omission feels concerning.

The biggest positive to occur this calendar year was ridding themselves of that awful debt, but it was replaced with new debt at 9% over the next three years with further dilution tied to the end of the debentures term. Even when considering the post financial revisions to their balance sheet, their liquidity still looks poor. They are burning cash on a quarterly basis and spending capital on leasehold improvement for their new store openings. While we will get a better look in three months, right now it’s hard to imagine them lasting their 2027 fiscal year without the need to raise capital yet again or increase debt.

This is after 111% dilutive measures in the past year and 100M in ITM warrants and options set to explode this float even further.

Another concerning portion of PesoRama’s financials is one I haven’t even discussed yet. Legal Claims.

Nine legal claims have been filed against PesoRama which spans nearly three pages within their most recent MD&A. While three of these claims date prior to July of 2022, the other six appear to be from the last twelve months. While legal claims do happen from time to time against public companies, SIX looks to be more than a coincidence.

Former staff, the former CEO and CFO, a freight provider, consultants, software provider, and even their former attorney have issued claims against the company. Many of these claims are for failure to make payments for services allegedly rendered. Remeber when I mentioned the significant growth in accounts payable? Are there any more shoes (or claims) to drop here? You have to wonder.

They have already recognized over $1M in provisions expecting to lose or partially lose some of these cases, but the final amounts could be much higher.

In short, PesoRama is one ugly baby. Speaking of short, it’s getting awfully tempting to play the other side at this valuation. PESO was under a $17M market cap one year ago. The implied market cap is nearly ten times that, with likely further dilutionary measures in the months ahead.

That’s 5.3 P/S while being very unprofitable on even the EBITDA and AEBITDA lines.

Ugly baby. Maintaining the one star while resisting the temptation for a downgrade.

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Disclaimer:

My intent is for my reviews to be a bolt on to due diligence that you have already completed. I receive dozens of review requests a week, therefore my own DD may be great or none whatsoever. Unless otherwise stated or implied, my opinions are on the financial performance of the company based on their most recent filings. I conduct these reviews to assist other retail investors whose research skills are limited when it comes to reviewing financial statements. I do not accept compensation of any kind from companies I review.

Wolf FINS Reviews are intended to be informational and are based on personal opinion. They are not intended to be financial advice, and all readers are encouraged to perform their own due diligence prior to their investment decisions, including discussions with their investment advisor.

This will be my first look and review of Xtract One in what appears to be some heavy interest out of the Wolf Den discord.

Xtract One Technologies is a Toronto-based company that develops and commercializes AI-powered weapons detection and threat detection gateway solutions. They also trade on the big boy TSX exchange and currently trade at just under a $150M market cap.

They released their Q3 just over two weeks ago to some fanfare (at least for a short spell), which sent the stock up as much as 58% during the week, but has since given back 22% from their June 11th post financials run. Longer term holders are likely satisfied with their investment as XTRA is up 64% over the past year. On the other hand, if you purchased shares at their 52 week high back in October, you’re down 40%. Welcome to microcaps.

The growth story is impressive with $24M of revenue on a TTM basis after doing just $4.1M in their 2023 fiscal year. The rest of their fundamentals are much less impressive however. They are still an operational cash burning organization with $6.4M of burn (TTM), and trade at over 6.5x P/S and are still heavily unprofitable on the net income and EBITDA lines.

So, in the words of Total, “What the Dealio” with Xtract One?

As with all initial coverage stocks, this deep dive will be available to paid subscribers with a free release scheduled for July 6th.

Balance Sheet:

Sixty percent of Xtract One’s current liabilities, and two thirds of their total liabilities are made up of deferred revenue. I like to removed deferred’s from my ratio calculations and when this is done, the company has a very impressive current ratio of 6.4. It’s more than ok with deferred revenue left in as well.

At the end of April the company had $15.6M of cash on hand, $4.3M of receivables, $4.2M worth of inventory and $2.9M of other short term assets against $4.2M of liability commitments over the next twelve months. Xtract is debt free.

Receivables have tripled in their last nine months and they do not provide an aging report, although it is notable they have not made any provisions for write-offs at this stage.

Solid start.

Cash Flow:

Through three quarters, XTRA has burned through $5.4M in operational cash flow (OCF), only a slight improvement over the $5.6M of operational burn experienced at this time last year.

That might not tell the whole story. As you can see below, prior to working capital adjustments there was a 72% improvement in their burn rate. Their A/R growth and inventory investments have inflated their burn YoY. They still of course have to collect those receivables and have positive sell through of their inventory moving forward, but I’m going to suggest their OCF is better than it appears here.

Even at the $5.4M of operational burn, they do have the balance sheet to withstand future similar burn rates and likely have a cash runway of at least two years at these levels.

The reason their balance sheet looks as good as it does is due to the $11.5M raised in November of last year at 75 cents. Investors in that round are down by 21%. They also raised $2.6M through warrants. Xtract has not spent a penny within investing activities, highly unusual through nine months.

Overall their cash position is 90% greater then where they began the year.

Share Capital:

• 259.9M shares outstanding, 19% dilution over the past twelve months

• A whopping 76.6M warrants outstanding. 16.9M are currently ITM with the most recently issued 8.6M well out of it. But another 51M are within a nickel all expiring with in the next two years.

• 17M options with 5.1M ITM and another 6.1M within a dime.

• Very small insider ownership of 0.52% with 1% institutional ownership. The largest shareholder is MSG Sports with a 13.5% stake. (per SimplyWallSt)

• Small insider purchases in May and insiders have been exercising options at or just out of the money

Income Statement:

Revenue in the quarter was outstanding at $10.26M, just shy of 3x of the $3.47M they generated in the comparable quarter. Xtract delivers very healthy margins - 60.8% in Q3 which is 380 basis points higher than they delivered last year. That in turn generated 215% more gross profit dollars.

In addition, they also managed their operating costs efficiently, only growing by 29% on three times the revenue.

Even though there is a slight net loss of $245k in the quarter, that compares to a $3.08M loss in Q3 of last year. That type of revenue and margin improvement, along with impressive operating expense controls is good enough to award them the Wolf Trifecta for the quarter.

YTD metrics are pretty good as well

• Revenue up by 97% to $20.65M vs $10.51

• Margin of 58.3%, down over 500 basis points from 63.7% generating 85% more gross profit dollars

• Expenses up 16% - excellent conversion on 85% more GP

• Net loss of $5.5M vs $8.4M, a 34% reduction

They miss out on the Wolf Trifecta due to the margin erosion, but their metrics are headed in the right direction.

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Summary:

So the balance sheet is excellent, the P&L improvements in this latest quarter are very good and while the cash flow section doesn’t look great in comparison to last year, it does show some signs of improvement too - they were in fact cash flow neutral in Q3

This float on the other hand leaves a lot to be desired. Including warrants that are within a nickel and options within a dime, we’re looking at a float of nearly 325M shares, an additional 24% dilution from where we stand and an implied market cap of over $191M. That takes their P/S valuation to 8x.

With nearly 20M warrants expiring in April of next year and another 30M a year afterwards around today’s share price will create a lot of overhang concerns.

Based on the above, you’re really going to have to love the due diligence. To begin I will attach the company’s investor deck below:

The Madison Square Garden relationship definitely adds some credibility to the bull case, their largest shareholder by far and they also hold millions more in warrants. In addition to traditional stadium security, the company is expanding into schools and healthcare sectors.

Those expansion markets aren’t just aspirations as they have been able to land health care centers on both sides of the border in the last few months.

They have also been able to land the PNE, multiple schools, and the British Museum (which I happened to visit last month), so they have been able to expand their reach beyond their initial offerings of stadiums, casinos and theatres. It is also encouraging that they have been able to expand across North America, showing tariff resiliency and across the pond as well.

None of those news releases announcing new contracts have any dollars attached to them unfortunately. They do have a current backlog of about $45M. That is up about 26% so therefore it appears they will be quite lumpy revenue producers and I would not expect the next couple of quarters to triple like their recent Q3.

I’m intrigued but I am leery of this valuation. Their closest publicly traded competitor appears to be Evolv Technologies ($EVLV - Nasdaq). Evolv’s revenue is about 10x larger, and so is their market cap, therefore you could argue it’s trading appropriately compared to peers (or peer).

Technically, I don’t love this chart and the stock is down 3% and appears to be losing 58 cent support with a 200MA test likely in the near future.

It does move near the top of my watchlist, but only a mid 2.75 star opening review for the time being. At 47 - 49 cents, I could be a buyer.

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Disclaimer:

My intent is for my reviews to be a bolt on to due diligence that you have already completed. I receive dozens of review requests a week, therefore my own DD may be great or none whatsoever. Unless otherwise stated or implied, my opinions are on the financial performance of the company based on their most recent filings. I conduct these reviews to assist other retail investors whose research skills are limited when it comes to reviewing financial statements. I do not accept compensation of any kind from companies I review.

Wolf FINS Reviews are intended to be informational and are based on personal opinion. They are not intended to be financial advice, and all readers are encouraged to perform their own due diligence prior to their investment decisions, including discussions with their investment advisor.