BeWhere Holdings Inc. (BEW.V)

Website

Yahoo Finance
Filing

Dec. 30, 2021
Sept. 30, 2021 Data

Price: $0.26. Shares: 88m,  Cap: $23m. 

1. Business
(1) History 

In 2014, Owen Moore and Chris Panczuk co-founded the company. Its main product is a Bluetooth beacon device that connects to tablets or cellphones. Then the tablet and cell will transfer data to the internet. The device is sold for $35/each and generates a $0.5/month service fee for the company. In 2015, it generated $100k in revenue but didn't have many costs.

It went public in early 2016 through a reverse merger. In 2016, revenue was still low and it used around $1.3m in cash.
In 2017, revenue grew to $1.8m but still used around $2m in cash.
In 2018, it started to sell the new cellular beacons. It uses the cell network to transfer data instead of relying on cellphones or other gateways.  Revenue grew to $3.6m while still burning around $1.9m in cash.
In 2019, revenue was 6m and used $1.5m in cash.
In 2020, revenue grew to 7m while still using $0.5m in cash.
In the first 3Q of 2021, revenue was $6.4m vs $5.2m last year. It also achieves cash even for the first time. It started to roll out the smaller BIMINI beacon in Q3.

(2) Major business 

1) BeTen: a LTE-M based cellular beacon device. It can send GPS and other data collected by sensors to the internet through the cellular network. It used 2 AA batteries and can last up to 10 years before needs to change the battery(3400 pings). This should be its major product.
2) BeSol: Similar to BeTen but with a solar panel.
3) BEMINI: This is its new product, it is much smaller and lighter than BeTen. It also includes Bluetooth and WIFI. The battery is rechargeable. However, it seems would last much shorter than the BeTen version before needs to be recharged(500 pings).

It sells its device through major distributors including Bell Canada, T-Mobile, AT&T, and some fleet management companies, etc. In Q3 2021, it sold over 23,000 devices at around $1.68m which indicated a $73 average unit price. From 2018 to Q3 2021, it had sold around $15m in hardware which is estimated to be around 200k units or less. Usually, the margin of the hardware is very low. I guess < 10%.

For each of the devices it sells, it collects $0.5 to $3 fees per month. However, it only happens after the end-user activated the device. It also collects the wireless fee on behalf of the wireless provider. By average it should collect around $1.5 per unit per month. The service fee should have a much higher margin (>50%). 

It has 12 employees currently and 7 of them are engineers. 

(3) Industry

2. Management

(1) Management

CEO Owen Moore:

In 1994, Andrew Moore and Owen Moore co-founded Grey Island Systems International in 1998. It provides an internet-based vehicle location service.  Later they took it public in 2002 through a reverse merger. In 2009, the company was able to generate $24m in revenue and it was merged with WebTech Wireless through stock for stock exchange and was valued at around $44m($0.49/share x 90m shares). At the time of sale, both Andrew and Owen holds around 5m shares. Both were exchanged to around 1.9m shares of WebTech.Owen joined WebTech as COO and Andrew as CTO. But both of them left WebTech in Mar. 2011.  In 2015, WebTech was merged to BSM technology also through stock for stock exchange. 

In 2019, BSM technology was acquired by Geotab for $117m. At that time, it generates around $60m in revenue and $2.5m in FCF. 

From 2012 to 2014, Owen was with BSM technology as EVP of sales.

COO Chris Panczuk:

Chris was working for BSM from 1998 to 2014, at the time of his departure, he was the VP of Enterprise Sales. 

(2) Ownership and compensation

In 2015, at the time of IPO each of them holds around 8.5m shares which were issued to them for free. They account for over 40% of the total 40m shares after the IPO. They still hold those amounts of shares now. Also, Bell Canada holds around 6m to 7m shares. 

Management compensation is very modest.  

3. Financial data

Notes: 

Previously it invoices its largest distributor the full-service fee that the end customer paid to them which is around $0.5 to $3/month/device. That includes pass-through fees which it needs to return to its distributor later. In Mar. 2021, the distributor starts to pre-deduct the data fee from the service fee. Thus it only invoices the net fee as its recurring revenue. As a result, its recurring revenue in the first 3Q is down compared to last year. In fact, it should be up if using the same revenue recognition standard. 

Notes: Debt and cash

As of Sept. 2021, 2.7m in cash and no debt. 

Notes: Share information

At the time of IPO, it has 28m shares which are issued at around $0. 

It raised $2m at $0.15/share at the time of IPO. Later 2016, it raised another $1.3m at the same price. Total shares are around 50m at end of 2016. 

In 2017, it raised $4.5m by issuing 15m shares at around $0.30/share. Total shares are around 65m at end of 2017. 

In 2018, it only raised 300k by warrant exercise. 

In 2019, it raised again $4m by issuing 20m shares at $0.20/share. Total shares raised to around 88m. It is likely that Bell Canada's participated in this round and got 6m to 7m shares. 

Currently, it has around 900k warrants at $0.19/share. 10m warrants at $0.35/share. 1m options at price < 0.20. 2m options at price > 0.28. 

4. Valuation and comments
(1) Currently the company is selling around 2.5 times of its annual revenue with no profit. It is not really cheap.  However, given the strong growth it had achieved in the past and the very high margin recurring service revenue, it could be very profitable once it continues to sell more products and collects more monthly service fees. 

5. Risk
(1) It is relying on several major distributors which might affect its business a lot if sales to any of them go wrong. 

(2) The IoT space is very competitive. Don't really know how its devices compare to others. 

6. Conclusion

Overall, the company had been doing very well and starting to be profitable. The growth potential is quite good. The current price is not very cheap but acceptable if the growth trend will continue. 

 

Zedcor Inc. (ZDC.V)

Website

Yahoo Finance
Filing

Oct. 22, 2021
June. 30, 2021 Data

Price: $0.38. Shares: 58m, options+warrants: 8m, Cap: $21.4m. 

1. Business
(1) History 

The company was originally called Zedcor Oilfield Rental Ltd. It was founded by Dean Swanberg and Todd Ziniuk around 2009. It rent oilfield-related equipment to oil exploration companies. It seems did very well before the oil price crash in 2014. In 2016, it merged with a similar rental business public company called CERF Inc. The owner was paid 3m shares valued at $0.70/share. $5m loan at 5%( later changed to 7%, also $2.5m loan was converted to 10m shares at $0.25/share). $3m preferred shares (5% interest, later changed to 10%). After the merger, CERF Inc. was changed to Zedcore Energy Inc.  

The company was still struggling with the rental business after that. It also has a lot of high-interest debt. By 2019,  its annual interest expense is over $3.6m which became a big burden to the company.  The company started to sell its underutilized rental asset to deleverage. By Q2 2021, it had fully divested its rental segment. 

However, started in 2018, the company started a sideline business that provides security surveillance services for remote pipelines and construction sites, etc. The subsidiary soon grew to over $10m in revenue in 2020. 

In Sept. 2020, the company changed its name again to Zedcor Inc. which reflects its focus on the security business. 

(2) Major business 

1)  Solar & Diesel hybrid watchtower: Currently it has around 150 units. Those watchtowers can be deployed in remote areas that lack electricity. Originally, this product is just a lighting tower for remote areas without access to electricity. The added camera seems a very good value creation for this product. One unit might cause $70k to $90k which generates around $70k rental revenue per year. 

2)  Electronic powered watchtower: Currently, it has around 38 units. It can be used with the supply of electricity. Obviously, it should be much cheaper than the Solar & Diesel watchtower. 

3)  The company also provides a centralized operation center that monitors sites for its customers and charges monthly fees for the service. 

Generally, the company generates over 50% gross margin on the watchtower rental and surveillance service after the depreciation of the rental device.  

(3) Industry

Competitors:

Stealth monitoring: This company seems mostly focused on fixed while not much remote. It doesn't have the diesel generator version nor the solar hybrid version. It is a US-based private company. Canada's head office is in Toronto.  Lots of videos on Youtube.  1000 employees.

Radius Security: 50-200 employees. It seems to do home and industrial both. It has a separate website in Vancouver. Pretty weird. 

2. Management

(1) Management

Dean Swanberg: He is the major owner of Zedcor Oilfield Rental and currently he owns 16m shares of the company. $2.5m debt at 7%.  $3m preferred shares at 10%. 

Todd Ziniuk: He was the general manager in Zedcor Oilfield Rental from 2010 to 2016. After joined  CERF, he became the COO of the company. In 2018, he was promoted to CEO of the company. 

(2) Ownership and compensation

Dean Swanberg: 16m shares 28%. Around 10m was from the conversion of the $2.5m debt. Rest was purchased after the merger. He is also the owner of the $2.5m debt and the 4.4m preferred shares. 

Dean Shillington: 6.4m 11%. He is from Maynbridge Capital which is the provider of the 12.75% debt.

Todd Ziniuk: 1.3m shares. It is from the merger in 2016, didn't change that much through the years. 

The CEO and CFO compensation is around 200k which is quite reasonable. 

3. Financial data

Notes: 

(1) In Q2 2021, it has a loss of over $600k on sales of leasing equipment.  Very concerning. Also, its leasing assets are $5m which is $2.4m less than its leasing liability($7.4m). In Q2 2021, leasing depreciation is around $100k, interest on leasing is just around $50k while leasing payment is around $500k. 

Notes: Debt and cash

(1) As Q2 2021, $4m debt at 12.75%, $1m at $7%. $3m loan at 7%. $2.9m preferred shares at 10%(4.4m at 0.70/share). Total $11m. annual interest run rate $1.1m. Plus the leasing finance, it should be around $1.5m per year.

In Oct. 2020, it has been able to refinance its $5m 12.75% debt into 5% debt. However, the remaining 3m loan and the preferred shares are still the same. I estimate its interest payment should be still around 1.2m per year. 

Notes: Share information

As of Q2 2021, 3.2m options are outstanding, mostly at $0.15/share. Also, there are 4.7m warrants outstanding at $0.12/share. They are mainly from debt modification. The current shares count is 58m.

4. Valuation and comments
(1) The security segment was doing really well since its creation. It has a quite good gross margin. Currently, it generates over $1.5m gross margins a quarter after depreciation which is around 50%. Current SG&A is around $800k per quarter. Assuming real interest expense is around 300k and leasing payment of $500k. It just made even if assuming the debt has been refinanced in Q2. However, since it records less depreciation+interest for leasing, it would be shown as a profitable quarter. 

5. Risk
(1) The company wasn't managed very well in the past. It lost a lot of money during the last several years. It might not be able to put its expense under control as the new business is ramping up. 

(2) There a legacy accounting items like leasing and sub-leasing. Don't really understand those items.

(3) It is hard to tell the management's intention as the major shareholder still holds the 6m of high-interest debt and preferred shares. I would like to see those get converted to lower interest debt as well.

6. Conclusion

Overall,  the company has a quite messy history and there is still some concern about it. However, there is a potential for the new security business to take off. The current price is acceptable but not that cheap. Should not heavily invest. 

 

Rocky Mountain Liquor Inc. (RUM.V)

Website

Yahoo Finance
Filing

Sept 27, 2021
June. 30, 2021 Data

Price: $0.18. Shares: 48m, Cap: $8.5m.

1. Business
(1) History 

The company was founded by Peter Byrne in 2001 with the purchase of 3 liquor stores in Alberta namely Anderson liquor. In 2008, it had grown to 18 stores. It IPOed through a reverse merger and quickly grew to 26 stores in 2009. Peter took the CEO role while his daughter Allison Byrne was the COO. 

It continues to grow the store number to a peak of 47 stores in 2014. Its revenue peaked in 2014 at $56m with around 2.2m in EBITDA. However, real income was just around 500k because of the high-interest expense of 1.1m and close to 500k CapX.  By then, it had incurred 11.2m in goodwill from all the acquisitions. It is total debt is around $14m.

In 2015, the Alberta government imposed a 22% increase in liquor tax. Also, the oil & gas industry started to suffer from the lower oil prices. The company closed 3 stores in 2015. Revenue was down over 10% to $50m. It still made a profit of around 500k. 

In 2016, It wrote down goodwill of 4.4m. At the same time, Alberta increased the minimum wage to $12.20, which will increase to $13.6 in Oct. 2017 and $15 in 2018. This creates pressure on its operation. 

From 2016 to 2018, it reduced store count to 29. However, revenue stayed relatively stable at the $44m level. Mainly because it rebranded some stores to the Great Canadian Liquor(GCL) brand which has a lower margin but higher sales. It incurred close to $3m in real losses in those years. 

By end of 2018, it has $8m bank debt plus $7m in convertible debt. The interest payment of $1m became a big burden to the company. In early 2019, Peter stepped down from the CEO role and Allison took replaced him. In July 2019, it converted all $6.85m of 7.5%convertible debt into 180m shares at $0.035/share. This techniquely restructured the company and the debt holder owns over 70% of the company after that. 

In 2019, the operation stayed almost the same as in 2018.  It started to make a small profit of around $200k because of the reduced interest expense and a close to zero CapX. 

In 2020, the company benefited from the pandemic. Same-store sales increased quite a bit while it closed 3 stores to 26 stores at year-end. Revenue increased to $48m while EBITDA is around $2.3m. Real income is close to 2m thanks to the lower 400k interest and almost zero CapX. 

For the first 2 quarters in 2021, it generated $22m in revenue vs $23.7m in 2020. It generated $700k in real income vs around $1m in last year. 

(2) Major business

1)  It has 26 stores mainly in the rural Albert area. They are mainly low-price discount liquor stores. For a typical store, it can generate around $1.5 to $1.8 in annual sales. Most likely it will employ a full-time manager and an hourly employee and a part-time worker. 

2) The business is quite seasonal. Usually, the first quarter sale is the lowerest with close to zero in EBITDA while the 2nd is the highest and the 3rd quarter and 4th quarter will be lower than the 2nd quarter. 

3) The margin is relatively stable, it is a little bit higher before 2016. Since 2018, it is stable at 22%.  

(3) Industry

Alberta has privatized the liquor industry in 1993. Since then there are over 2000 liquor stores across the whole province. Most of the stores are mom-and-pop kinds of stores. It is very easy to enter the business. Before 2017, the business seems pretty easy. Since 2017, the industry has suffered tough competition as the total consumption was down and the cost of operation is up. By end of 2020, there are 1500 retail liquor stores in Alberta. 

Sales value of the liquor market in Alberta from 2009/10 to 2019/20(in billion Canadian dollars)

Major player:

Alcanna Inc. (CLIQ.TO):  Owns around 200 stores in Alberta(closed 20 in 2020, then another 10 in the first half of 2021). Total sales 620m in 2020. It is obvious that Alcanna's per-store sales are higher(3m vs 1.8m). It seems Alcanna's store is much bigger since its inventory per store is around 420k vs 220k for RUM. The margin of Alcanna is very close to RUM. However, in 2020, Alcanna seems didn't make much much if removing profit from the selling of the discontinued operations. Alcanna also has some cannabis stores which were pinned off in 2020. Its operation is much more complicated than RUM. 

Real Canadian Liquorstore: 40 stores in Alberta. Belongs to Loblaw. They seem to be operated very well. 

2. Management

(1) Management

Peter Byrne: Previously he co-founded a pharmacy chain of 7 stores and sold them in 2004. 

Alison Radford(Byrne): She was previously working in accounting firms before joining the family business. 

(2) Ownership and compensation

Total shares 47.5m. No options.

Peter Byrne( Executive chair): 8.2m shares. 17.2% (175k salary in 2019)

Alison Radford(Byrne)(CEO): 1.6m shares 3.3% (160k salary in 2019)

Frank Coleman(Director): 1m shares, 2.1%

3. Financial data

Notes: SG&A expense

Since 2019, the company has adopted the capital leasing account accounting rule. It is SG&A expense has been reduced by $2m annual, but accounted in leasing depreciation and interest expense. 

Notes: Debt and cash
(1) As of June 2021, it has $5.9m in debt and the same amount in inventory. It carries an interest of prime+1.5%. Which has been reduced from prime + 2.65% in May 2021. The new annual interest expense should be less than 300k. 

Notes: Share information

Share outstanding: 47.5m, no options.

4. Valuation and comments
(1) Last year the company has generated around $2m in real cash. Even based on 2019's data but subtracting the extra $500 interest payment vs now, it still can generate $700k income. Based on the current year running rate, it should be much higher than the $700k level. The current market cap is just $8.5m, the share price is very cheap. 

(2) The current running rate of SG&A is around $8.5m. Interest expense is around $300k. If based on a 22% margin, it has to generate around $40m in revenue it makes cash even. If it generates $44m in revenue, it can generate around $900k in profit. If it generates $48m in revenue, it can generate $1.8m in profit. 

(3) Naturally it should benefit or stay neutral from high inflation if there is any in the future. 

(4) The company was over-leveraged in the past which was obviously a mistake. It had almost bankrupted the company. I think the management has learned the lesson. Currently, its debt is around its inventory level and the interest is also getting lower. 

5. Risk
(1) After the pandemic, as restaurants are opening, people's shopping habits for liquor might decrease and revert back to the pre-pandemic level. 

(2) Since 2019, the company's CapX has been almost close to zero vs over $500k before. Don't know whether that is an accounting change or a temporary cut down. If CapX reverts back, it will significantly affect its profit.

(3) The liquor industry in Alberta is very competitive and there is no barrier to entry.  Any new store opened nearby will affect its business significantly. However, because of the hardship that the industry experienced during the past several years, it is unlikely that lots of new stores will be open. 

6. Conclusion

Overall, although liquor retail is not a great business, the company has done quite well lately. The current price is quite acceptable. However, since there is some uncertainty, shouldn't be heavily invested. May need to watch it for a while. 

7.Links

 

MamaMancini's Holdings, Inc. (MMMB)

Website

Yahoo Finance
Filing

July 26, 2021
Apr. 30, 2021 Data

Price: $2.5. Shares: 35.7m, Cap: $90m.

1. Business
(1) History 

The company was co-founded by Dan Dougherty(Daniel Mancini), Carl Wolf & Matthew Brown in the fall of 2007. Previously Carl Wolf had run a successful low-fat cheese company in the 1990s. Together they try to utilize Dan's grandma's Italian all-nature meatball receipt in the frozen meatball market. 

Carl, Matthew & their family created a food production facility called Joseph Epstein Food Enterprises Inc.(JEFE), which became the sole supplier of the company's products. On the other hand, Dan is in charge of promoting their product in various places like TV, the internet, etc. It seems he is not participating in day to day running of the business but received licensing fees based on the sales volume. 

In 2013, they took the company public into the OTC market through a reverse merger.  

The company had grown revenue rapidly for the first several years with heavy expenses until fiscal 2015. It achieved $12m revenue but with a $3.5m EBITDA loss with $3.1m spending in advertising.  

In fiscal 2016, it intentionally terminated some low-margin accounts.  Its shelf placement was down compared to 2015. Its revenue was flat compared to 2015, but the margin improved by 2%. Also, it cut advertising expenses by $1m. As a result, the EBITDA loss was reduced to $2.0m.

In fiscal 2017, it grew revenue by 50% to $18m. Achieved positive FCF for the first time. 

In fiscal 2018,  revenue grew by another 50% to $27m.  Mainly by 35% more sales per shelf plus increases in shelf placement. In Dec. 2017, JEFE was merged into the company without any payment to Wolf's family. 

In fiscal 2019, in Q2 and Q4 revenue is down caused by purchasing offices and skipped in-and-out rotation from major retail customers. As a result, full-year revenue didn't grow much but with more profit. It paid down all high-interest debt. 

In fiscal 2020, the company is doing well with $35m revenue which is not much different from 2019 if not for the Q2 and Q4 pullback in 2019. 

In fiscal 2021, with some help from the pandemic, it achieved 40m in revenue and around 3.5m in income. 

(2) Major business

1) Main products are meatballs and meatball sauces.  It has much fewer ingredients than other types of meatball products. It seems its user loyalty is very high. Usually, it can generate around 30% gross margin after slotting fees and promotions.

2)  Slotting fees and discounts: In 2021, it pays around 1.5m for these fees, down from 1.7m in 2020, which is around 3.5% of total revenue. 

3)  Licensing fees to Dan Mancini:  Annual 6%-2% for sales below $20m, 1% for above $20m. Paid 540k in 2021. 

4) It seems Sam's Club is its top customer with over $15m in revenue currently. If it can do the same with Costco, it could add another 15m to 20m in revenue. 

(3) Industry

2. Management

(1) Management

Carl Wolf 

Carl was the CEO of the company since the beginning. Previously, he found a company in 1983 to promote a low-fat cheese brand called Alpine Lace. Later it went public with very high growth in the life of the company. It had achieved 160m in revenue in the early 1990s. But the income is just around 2m to 3m. In 1997, the company was sold to Land O'Lakes for $62m,  which may include some debt as well. At the time, the company might count around 50% of the total US low-fat cheese market. Carl held around 1.6m(30%) shares of the company which is around $15m if using the acquisition price of $9.125/share.

Between 1997 to 2012, Carl seems didn't take any new business venture until he co-founded MMMB. When compared to the previous cheese company, it seems MMMB was running much more smoothly. It consistently increases its EBITDA margin and net earning as the revenue rumped up. 

Matthew Brown: president and COO.  Carl Wolf's son-in-law. Previously worked for 30 years in sales and marketing in the food industry. In MMMB, it seems he is in charge of the productions.

Daniel Mancini: The meatball recipe holder. Also the face for the product on TVs and Ads etc. He gets royalty payments annually based on the revenue level.

(2) Ownership and Compensation

Total shares 35.7m. Options around 800k at an average price of $0.68.

Carl Wolf: 7.2m shares. 20%. 

Matthew Brown: 5.6m shares 16%. All insiders hold 51% of the total shares.

Compensation for all management < 200k per year, very low.

3. Financial data

Notes: In Jan 2014, it changed year-end from December to January. Thus 2014 data only contains one-month data. 

Notes: Debt and cash
(1) Debt is very small and net debt is negative. 

Notes: Share information

Shares outstanding: 35.7m + 800k options.

4. Valuation and comments
(1) Currently the company is trading around $91m vs $3.5 annual income. That is around 26 P/E. It is quite expensive. However, given the high growth and past tracking record, it is reasonable to expect the sales and income both will grow quite well in the future. It will still generate quite a good return even with the current price. 

(2) The management seems very good at marketing its product and the company's relationship with its customers seems quite good. 

(3) For the first 20m revenue, it roughly generates 5% EBITDA. For the second 20m revenue, it generates roughly 15% EBITDA. For the next 40m, it might be able to generate 20% EBITDA. 

(4) The management had a very good tracking record,  holds half of the total shares, and takes a very modest salary. 

5. Risk
(1) Top one customer(Don't know who) counts 40% of its revenue. Although it is unlikely that their relationship will break, there is still some risk.

(2) Retail business is usually very competitive and can change very fast in a short time. 

(3) After the pandemic, people might not purchase as much frozen food as before.  

(4) CEO is in his 70s and might face retirement soon.

6. Conclusion

Overall, the company is managed very well and growing fast. The management is very aligned with shareholders. The current price is not cheap but can be acceptable if the current growth can be maintained. 

7. Links

https://www.marthastewart.com/333236/mama-mancinis-meatballs

GBLT Corp. (GBLT.V)

Website
Yahoo Finance
Filing

June 18, 2021
Mar. 31, 2021 Data, all number is in EU€  

Price: $0.26. Shares: 113m, Cap: $29m.

1.Business
(1) History 

The company was founded by Dr. Thilo Senst in 2004 in German. Originally it was called GBT and today it is still the operating subsidiary of GBLT. Dr. Senst was the CEO of GBT since 2008. GBT was formed as a licensee of AGFAPHOTO for battery products. AGFAPHOTO was well known old photo film maker in Europe similar to Kodak. Later it entered a license with Polaroid for lighting and mobile power storage. It also entered a license with Kodak for mobile power storage as well. 

Since 2015, it was able to generate around €20m+ annual revenue till 2019, however, its margin was also down from 10% to 5% level. As a result, the gross margin stayed at the €1m level. It had incurred €1m to €1.5m losses in those years. The company was IPOed in 2018 in TSXV through a reverse merger. That also added around €1m loss in 2018. 

During the start of the pandemic, the company started its own PPE product line called Dr. Senst including masks, sanitizers, and thermometers. 

In 2020, its margin was back to 12% and revenue also grew over 15%. As a result, its gross margin tripled to close to €3m and made a real income of €1m. 

In early 2021, it entered a US$7.5m contract to supply private label batteries for a customer. Later in Q2, it entered a US$20m supply agreement for the next 3 years. As a result, in Q1 2021, it has tripled its revenue and generated around €400k in real income.  The battery contract is estimated to add €7m for the company each year for the next 3 years, although it might add much more in 2021 than the other 2 years. 

(2) Major business

1) Batteries: Household alkaline and lithium batteries carry the brand name AGFAPHOTO. It should have around a 10% gross margin. Also, it is the supplier for the private labels of at least two customers. The private label might only have around a 5% gross margin.

2) Mobile power storage: The big portable power bank which can be used as an emergency power supply etc. Originally, it is under the brand name Polaroid. Now it is under the brand name Kodak. This might have around over a 20% margin. 

3) PPE: Under its own brand Dr. Senst. Including masks, thermometer, sanitizers. Currently, there is a bug repellent is under development. PPE product is its highest-margin product of over 20%.

4) Lighting products: Under the brand name Polaroid.  Now it is under the brand name: Avide/ENTAC. It is now focusing on LED lighting. The sales of lighting seem affected by the pandemic quite a bit. 

Unfortunately, there are no revenue numbers for each of these products.  Its major market seems to be German. Major customers are a retail chain and a drug store chain. It does not have any product development or manufacturing facilities. It solely relies on its supplier(most likely from China) to provide all those. 

(3) Industry

Tier one(A brand) producers for household batteries are Duracell and Energizer. AGFAPHOTO is competing with tier 2(B brand) producers such as Panasonic, Samsung, etc. There are also private label batteries as well like in Costco, Walmart,  Amazon. 

The most popular brand of mobile power storage seems to be Jackery. Mainly used in camping or RV etc.  

2. Management

(1) Management

Dr. Thilo Senst: Before found GBT, he was the CEO of TURA AG from 1996 to 2005. It is also in the photo film-related business. 

In 2008, he was declared personal bankruptcy by a German court and in 2014, that bankruptcy was discharged. Don't know the reason. 

(2) Ownership and compensation

Based on 2019 data, Dr. Senst holds 77m shares, around 67% of total shares. His compensation for 2018 and 2019 was less than €100k which was even lower than the COO's. 

3. Financial data

Notes: Debt and cash
(1) Currently around €1.5m in debt. 

Notes: Share information

Share outstanding: 113m, around 6m options at a very low price. 

4. Valuation and comments
(1) In the next 3 years, the new private-label battery deal might add €10m, €6m, €6m revenue each year. That will generate an extra €500k, €300k, €300k in extra gross gross profit while not adding too much cost. 

(2) Currently, the company is traded around CAD$29m which is around €20m, about 20 times P/E based on 2020 real income of €1m. It is not really cheap, however, the expected growth could justify the price paid. 

(3) Generally, this is a very competitive business and it is not a great place to do business. However, it seems that the company has a very strong relationship with its clients. It was able to maintain and create new business with the existing clients including its products and private label deals. 

(4) It seems to manage the production and supply chain quite well and maintained a high quality of products and deliveries. Its relationship with its supplier seems good and the business is very capital-light. 

5. Risk
(1) The company's growth is not without risk. It could lose major contracts or customers or etc. 

(2) Its supply chain will also have the risk of having trouble.

(3) It might maintain current sales but the margin could go down again. 

6. Conclusion

The company has great potential going forward but with some risk. The current price is acceptable but not very cheap and shouldn't be heavily invested. 

7.Links

YANGAROO Inc. (YOO.V)

Website
Yahoo Finance
Filing

May. 28, 2021
Dec. 31, 2020 Data
Price: $0.26. Shares: 60m, Cap: $16m.

1.Business
(1) History 

The company was founded by John Heaven and Cliff Hunt in 1999 and originally it was called Musicrypt.  Its main product is called Digital Media Distribution System (DMDS),  a system to distribute media via the Internet as a replacement for the CD delivery. John was the CEO and Cliff was the COO of the company. In 2003, they took the company public and raised around $1.7m at $0.75/share. 

The company revenue is zero at the time of the IPO. It slowly grew revenue to $800k at 2010. At the same time, it had occurred over $20m in losses which mostly founded by issuing new shares. John Heaven left the company at late 2010. 

In 2007, Destiny Media(DSY.V), its main competitor from the US filed a $25m lawsuit with YOO for sending false information to their Canadian customers. Later the company filed a $15m counter lawsuit with DSY for infringing its patent. In 2011, they settled the lawsuits by YOO paying $600k to DSY. 

Since sometime in 2008, the company was entering contend delivery for awards events such as Grammy Award, etc. It was very small at the beginning. Gradually, it became been quite significant.

Since 2011, the company was under new management briefly.  At the same time, it started a new segment which is aiming to deliver audio&video content for advertising. In 2012, it hired Gary Moss, a long-time board member as the new CEO. 

From 2011 to 2016, the company was able to grow revenue from $1.5m to over $5m. Mainly from the Advertising and the Award Management while the music delivery was flat. It still generated over $2m in losses each year but reduced to $800k in 2016. 

In 2017, Grant Schuetrumpf joined the company as the leader of the advertisement segment. Coincident with his presents, the company's ad revenue was doubled from around 600k/quarter to around 1.2k/quarter since Q1 2017. As a result, in 2017, total revenue grew to over $7.5m. However, it stayed at $7.5m to $8m until now. Since 2017, it was able to stay profitable with around $500k in real income each year.  

In late 2020, Gary Moss resigned from the CEO role and was replaced by Grant. The company paid him around $600k as severance payment in Q4 2020. 

In May 2021, the company acquired Digital Media Services Inc(DMS) for USD$5.5m. Paid $2.5m on close and the rest will be paid in 3 years if DMS's revenue reaches a certain milestone. DMS was generating around USD$6m in revenue previous to the pandemic. Now it is generating around US$4m in revenue.  The company did this mainly by borrowing from the National Bank Of Canada.  

(2) Major business

Its major software platform is called DMDS, a digital secure delivery for media files. It was used in all across its business segments:

1. Advertising 

The major growth segment generates close to $5m in revenue which counts 60% of its revenue. It seems still to have more potential in this segment. With the new DMS acquisition, ad revenue could be doubled in the near future. 

2. Music delivery 

Including both audio and video, this is the original business that hasn't grow much for the last 5 years. It is staggered at around $1.7m in revenue.

3. Award management

Management of the content delivery for award events etc. It hasn't grown that much in the last 5 years at close to $1.5m in revenue. 

(3) Industry
Destiny Media(DSY.V): This is its major competitor for years. DSY was exclusively focused on music delivery. It has around 2 times YOO's revenue. 

2. Management

Grant Schuetrumpf: He is an Australian. Previously he has worked for Omnilab Media from 2006 to 2014 in Sydney. In 2014, he moved to New York to in charge of Dubsat(North America&EU),  a subsidiary of Omnilab. What Dubsat was doing is quite similar to Yangaroo. In late 2016, Dubsat was sold to Adstream, a UK company that manages the full lifecycle of ads management from creation to analytics. In 2017, he joined Yangaroo as the president of the advertising segment. In late 2020, he was promoted to CEO to replace Gary Moss. 

Shepard Boone: SVP of Ingalls and Snyder, a New York-based investment firm that manages around $6.7B in assets. Since 2010, Ingalls and Snyder started to accumulated shares of YOO. Boones was elected to YOO's board in 2019. Currently, he is the largest shareholder of the company. 

Gary Moss: He was on Yangaroo's board since 2004. He was YOO's CEO from 2012 to 2020.

3. Financial data

Notes: Debt and cash
Currently, it has 1.9m in cash and no debt. However, because of the new acquisition, it will carry around $3m debt. 

Notes 2: Share information

Ingalls and Snyder: Currently, it holds 15.5m shares, around 25%, of which 9.8m shares are under Boone's name.  

Gerry Hurlow: He was on YOO's board from 2015 to 2019. In 2015, he holds 4.5m shares, close to 10%. He held 6.2m shares when he left YOO's board. Currently, he is still holding 6m shares. 

Anthony Miller: Current chairman. He holds 2.3m shares. 

Around 5.5m options outstanding priced lower than $0.185.

In total, insiders hold around 40% if Gerry Hurlow is counted. 

4. Valuation and comments
(1) Although 2020 is a good year for the company. Its profit increase is mainly from the government. The real earning of the company since 2017 is around 0.5m per year. The current market cap is around 15m which is not cheap at all. 

(2) It does have some potential, especially in the Advertising segment. If the new acquisition worked out, it could be very good. 

  

5. Risk
(1) The company had a very messy history in the past. It trades its stock like trash and the board changes quite often. The management is paid pretty generously. However, the latest controlling board member and the new CEO seem better. Sill needs some time to tell. 

(2) The is not much organic growth since 2017.

(3) The new acquisition might not work as expected and could drag down the profit. 

6. Conclusion

The company is doing well and has some potential. However, the acquisition might not work. The current price is not cheap. 

7.Links

BluMetric Environmental Inc. (BLM.V)

 Website

Yahoo Finance
Filing

Apr. 9, 2021
Dec. 31, 2020 Data, Year-end Sept. 30.
Price: $0.50. Shares :28.7m, Cap: $14m.

1.Business
(1) History 

The company was originally called WESA Group Inc. It was founded in 1976 specializes in water sanitation for the mining industry, government, etc. In 2012, it IPOed through a reverse takeover. 

The company didn't do well in 2013 and 2014. But becoming profitable in 2015. Roughly every year it generates around 1m in EBITDA but spent close to 500k in interest payment. Real income probably just around 500k.  

In 2020, it generated 2.6m in operating cash which includes 1.2m in CEWS from the government. It spent around 500k in leasing and CapX. Its real earning is around 800k. It also generated 1.1m from selling its building. 

(2) Major business

Currently, its business is mostly contract-based. It has 4 sectors including industry, government, military, and mining. Each sector counts revenue from 20% to 30%. 

(3) Industry

2. Management

Roger Woeller: He was the CEO of the company since 2000. Retired at the end of 2017.  He held 1.6m(6.4%) shares at the time of IPO(2012). At the time of his retirement, he holds around 1.9m shares. Also, the company paid him 280k shares upon his retirement.  He might hold 2.2m now.

Scott MacFabe: CEO since early 2018. Previously he was working in the US in the same industry for many years. He is looking for an opportunity to relocated to Canada and reached out to the company when Roger Woeller is seeking retirement. Don't know much about his management history. Scott holds 500k options at $0.24/share.

3. Financial data

Notes: Debt and cash
The company was able to reduce its debt significantly in recent years. Now its debt is around 3.7m and has cash of 2.6m. The debt is up for renewal later this year. I think it could get a much better rate or be paid down quite a bit. 

Notes: Share information

At the time of IPO in 2012, the company has 25m shares outstanding. Now it set around 28.7m shares. Didn't changed that much.

Currently, it has around 1m options outstanding at $0.24/share.

4. Valuation and comments
(1) The company has been profitable since 2015. However, it is until 2019 it has started to generate cash from the operation which is coincident with MacFabe became the new CEO. Mainly through the reduction of account receivables.  

(2) It seems to be able to generate around $1m real income which makes the $14m cap a quite reasonable price. The business is performing quite well lately. If the trend continues, it might become pretty attractive. 

  

5. Risk
(1) The company's revenue is contract-based. It is hard to tell how the business will perform in the future. 

(2) It is profitable for many years but only generated cash in the last 2 years. Hard to tell whether this will continue. 

(3) The current profitability might also not continue. 

6. Conclusion

The company seems managed well lately. However, there seems very little growth potential. Currently, the share price is acceptable but not really cheap. 

7.Links

PopReach Corporation (POPR.V)

Website

Yahoo Finance
Filing

Feb. 20, 2021
Sept. 30, 2020 Data, in USD$ 
Price: CA$1.25. Shares :73m, Cap: CA$91m

1.Business
(1) History 

The company was founded in 2015 by Chris Locke as a mobile game development company.  Previously, he was working on mobile games for years. 

In 2016, it signed a contract with Metro Trains Melbourne to develop a mobile game called Dumb Ways to Die.  The game was released in 2016. The game is still available today. 

In 2017, it signed a contract with Studio71 to develop a game called Guava Juice: Tub Tapper. The game was released in 2018. It seems didn't go well.

In Feb. 2018, Jon Walsh joined the company as the new CEO. Previously, he is working in the video game industry as well, but more in management roles.  Since then, the company tries to change its strategy to acquire existing FTP(Free to Play) games instead of developing new ones. 

In 2018, it did an acquisition of a Halifax company and didn't go well. Later in 2019, it returned all assets back to the company. 

At the end of 2018, it acquired 22 games, mainly the War of Nations, from RockYou for around $8m+ $1m in contingency payment. RockYou filed for bankruptcy in 2019. The company wrote down $1m in intangible assets caused by that.  The transfer of the game assets from RockYou was postponed a little bit but went well after. The company was able to stabilize the revenue of War of Nations and cut the expense by 1/3. 

In Sept. 2019, the company acquired 4 games related to Smurfs for $1.8m + $300k optional payment. The transfer of the game assets seems much simpler. In 2019, the company generated $3m in adjusted EBITDA mainly from the 2018 game acquisition. 

In June 2020, it IPOed through a reverse merger. Around 3.75m shares were issued to the shell company that has CA$2m cash. The shell company was traded around CA$0.09/share on a pre 8 for 1 reverse split basis. The shell company was valued as CA$3m which is CA$0.40/share. For each of PopReach's 5m shares, there are 7.62 new shares in replacement. PopReach was valued at CA$31m. Totally around 51m shares were outstanding after the IPO. 

For the first 3 quarters of 2020, it generated 3.2m in adjusted EBITDA which is higher than the full year 2019. 

In Nov. 2020, the company received CA$5m(7m shares) from an Alibaba-backed VC called New Insight at CA$0.72/shares. It also completed an offering of CA$17.25m(13.8m shares) at CA$1.25m/shares. As a result, around 20m more shares were added. 

(2) Major business

Currently, it owns 24 games, it generates 95% of revenue from the in-app purchase made by game players, 5% from ads. It has around 1m monthly player which generates around $19m annual revenue. 

Currently, it has 110 employees from India mainly from the RockYou acquisition. It also has 20 employees in Canada. 

 

(3) Industry
It seems quite unique by acquiring end-of-life games. There seems very limited player doing the same thing. 

2. Management

Chris Locke: Founder and current COO. He is a very experienced mobile game developer and is the original owner of the Smurfs game which he sold and now the company bought back. 

Jon Walsh: Current CEO. He was the CEO of Fuse Powered from 2009 to 2016,  a mobile games supporting technology company. It was sold to Upsight in 2016.  From 2001 to 2009, he was the CEO of Groove Games that created over 20 games for PC, Xbox and PS2.

Notes: Share information

Right after the IPO, 

Chris Locke holds 10m shares+1/4 of Push Capital(7.2m)=11.8m shares. 

Jon Walsh holds 4.1m shares + 1/4 of Push Capital(7.2m)=5.9m shares. 

Trevor Fencott, another director, holds 4.0m shares+1/4 of Push Capital(7.2m)=5.8m shares.

Michael Haines, 4.2m through Push Corp + 1/4 of Push Capital(7.2m)=6.0m shares.

Totally insiders might own around 40%-50% of total shares. 

Currently, it has around 3.4m options outstanding at CA$0.28/share.

3. Financial data

Notes: Debt and cash
By Sept. 2020, it has around $1.9m in $6.1m in debt. After Q3, it received CA$5.0 + CA$17.5m from 20m new shares offering. It should have $8m in net cash by the year-end. 

4. Valuation and comments
(1) Currently, the company generates less than 20m in revenue and $4m in EBITDA. Its market cap is around $72m in USD. Remove the $8m cash, it is traded around 16 times EV/EBITDA. On a revenue basis, it is traded 3.5 times its revenue. The valuation is not cheap at all. 

(2) The company will most likely continue to acquire new games. There is quite some potential that the strategy works. Also, it might be able to continually generate more cash from existing games by cutting costs and improve revenue. 

(3) The management team is quite seasoned with excellent past experience. 

  

5. Risk
(1) It is a new IPO and there is a limited history of the company.

(2) The mobile gaming space is very dynamic and the performance of its game may change quickly. Should monitor it closely. 

6. Conclusion

The company seems managed well and has a quite good potential to grow. However, the current price is not cheap and there is some risk with its business. Should watch it closely. 

7.Links

NeuPath Health Inc. (NPTH.V)

 Website

Yahoo Finance
Filing

Jan. 13, 2021
Sept. 30, 2020 Data
Price: $0.70. Shares :42m, Diluted: 70m, Cap: $29m

1.Business
(1) History 

The company was founded in 2017 as a healthcare investment shell company. I think Bloom Burton is the major player behind this. It acquired 9 chronic pain clinic chains across Ontario called CPM(Centre for Pain Management). The price is around $12m including shares and taken over around 7m in debt. Those 9 centers generated less than 20m in revenue and with a loss of several million.

From 2018 to 2019, the company was able to improve the utilization rate of those clinics from around 30% to over 50% and make them profitable. The revenue from these clinics also grew to over 35m I think. 

In May 2018, it acquired 3 more pain management clinics called InMedic from RAM(Renaissance Asset Management) for around $12m including $8m in cash and $4m(6.5m shares) in stock. At the time, InMedic generates $12m in revenue and 900k income annually.   

In June 2020, it IPOed through a reverse merger.  In Nov. 2020, it issued around 13m new shares for $0.9/share which is oversubscribed. 

(2) Major business

Currently, it has 12 pain management centers across Ontario. 9 under the CPM brand and 3 under the InMedic brand. In total, they serve around 11,000 customers.  On average, each clinic generates around $4m in revenue and maybe $200k in EBITDA. 

 

(3) Debt and cash
By Sept. 2020, it has around 5m in debt and owns over 3m to BloomBurton. After Nov., the company should be cash positive. 

(4) Industry
According to the company, the pain management clinic is very fragmented. There are 60 clinics in Ontario and the company owns the highest number of clinics. The next biggest player owns 9 clinics. 

2. Management

Grant Connelly: Current CEO. He was CPM's general manager in 2018 and promoted to CEO in early 2019.  Previously he was CFO of two companies for 6 years. From 2014 to 2018, he found a health care tech company called VroomHealth aiming to reduce patients waiting time. Not sure how the company is doing now. He holds very few shares but has 350k options at the price of $1.00. 

Grishanth  Ram: From InMedic, he was CEO of the company briefly from 2018 to early 2019. still a current director. Owns around 5m shares. The biggest shareholder. 

Bloom Burton: Owns 4.4m shares. Founder Jolyon Burton is the current director of the company. 

There are around 10m warrants at $0.0001/share which really puzzles me. It might not valid for exercise for the full amount. 

(Update Mar. 26, 2021)

After reading the AIF document, I found the 10m cheap warrant was from the conversion of debt at $0.75/share. As of today, 3.2m of the $0.0001/share warrants were exercised. Also, there are 1.95m warrants at $1/share expired.  

By now, it has 45m shares outstanding, 23m warrants +2m options outstanding. Around 12m of them price< $1. Rest >= $1.

3. Financial data

4. Valuation and comments
(1) Currently, the company generates around 50m in revenue and over $2m in EBITDA. Currently, its Market Cap is over 40m which is not really cheap. On the EV to revenue basis, it is just traded less than one time of its revenue which is relatively cheap for a healthcare stock.

(2) The is plenty of room to grow organically since the utilization rate is just around 50%. 

(3) The company is intended to acquire other clinics. 

  

5. Risk
(1) It is a new IPO and there is very limited information about the company and its management. 

(2) Both organic growth and acquisition are yet to see. 

(3) Unlike PHA(premier health), the company seems to has no tech advantages. 

6. Conclusion

The company seems doing well and has some growth potential. However, it is still too early to tell. Should watch closely. 

7.Links

Premier Health of America Inc. (PHA.V)

Website

Yahoo Finance
Filing

Jan. 3, 2021
Year-end: Sept. 30, Based on Year-end 2020.
Price: $0.87 Shares:45m, Cap: $39m

2.3m options + 3.3m warrants at a very low price.

1.Business
(1) History 

The company was founded by Martin Legault in 2003 as a health care sector agency. It is originally called Groupe Premier Soin(GPS) and is still a subsidiary of PHA. It is somewhat similar to Nove Leap Health but mainly for nurses, not for PSW.  

From 2003 to 2016, the company grew its business organically. It also had developed a digital platform that seems very competitive. By 2016, it became a provincial player in Quebec. 

In 2017, it acquired 3 small competitors and had revenue of around 6m. 

In 2018, it acquired Excel Sante Inc for $1.25m which has around $3m in sales. In 2020, it has contributed $8.3m in revenue. The acquisition seems very successful. 

In early 2020, it IPOed through a reverse merger. The original price is just around $25c. The price has gone up quite a lot already. For the full year 2020, it has generated 20m in revenue and $2.1m in EBITDA. Almost doubled its revenue without new acquisition. The main reason is that Quebec has passed new legislation that effectively raised health workers' salaries. Which in turn has raised both the company's revenue and gross margin. 

After the year-end 2020, the company acquired Code Bleu in Nov. 2020. The price is $17m which consists of $10m in cash, $4.5m in stock at $0.59/share, and $2.5m performance payment in 3 years. Code Bleu has revenue of around 29m and an EBITDA of $3.9m in 2019. The company is targeting over 50m in revenue by year-end 2021. 

(2) Major business

Currently, the company has 19,000 workers in its system and 500 customers.  It has around 1500 active employees normally. Its major advantage is its IT system which can confirm an assignment within 10 minutes after a customer makes a request through its call center. Also, it can automatically log its contractors when performing the task it assigned through mobile apps. It can also automatically generated invoices and payroll information. It seems pretty advanced.  

The company seems to be able to generate around 25% in gross margin and around 10% in EBITDA. 

(3) Debt and cash
At the end of fiscal 2020,  it has around $2.5m in debt and $1.2m in cash. After the acquisition of Code Bleu, it should add another $10m in debt. The interest rate is below the primer rate +2%, which should be less than 5%. 

(4) Industry
The healthcare agency industry seems quite fragmented. In Quebec, there are around 40 agencies that are all privately held. Currently, PHA might count around 5% to 10% of the total market(if not counting Code Bleu). After the Code Bleu acquisition, it will achieve a 25% market share in Quebec. 

2. Management

Martin Legault is the founder and still the CEO of the company since 2003. Previous to 2003, he worked as a human resource director for a company. Based on tikr.com data, he owns over 50% of the total shares. 

3. Financial data

4. Valuation and comments
(1) The company is currently is trading close to 20 times to its EBITDA. The P/E ratio is even higher. It is not very cheap based on that. However, it is growing quite well both organically and by acquisition. If the high gross continues, then the current price becomes acceptable. Assume by fiscal 2022, it can achieve $60m revenue. It should be able to generate around $6m in EBITDA and around $4.5m in net income. Then it can double the current price. 

(2) Both the Excel Sante and Code Bleu acquisition are very cheap and the first one turned out very successful. Don't know the reason how they can get such a good deal. It is possible that their system is much better than its competitors and it creates an attraction to them. 

(3) The company seems to have the best IT system which could be disruptive in this niche market.  It will need to expand to other provinces like Ontario etc. 

  

5. Risk
(1) It is a new IPO and there is very limited information about the company and its management. 

(2) The new acquisition might not work as expected. 

 

6. Conclusion

The company seems managed well and has very high growth potential. However, since it is a new IPO and limited information available, shouldn't be heavily invested. 

7.Links