Weekend Update – November 20 2022

If you haven’t noticed, I’ve had some very welcome free time on my hands and have been able to dedicate some more time to the blog. So for better or for worse, I’ll be posting some more content. In the spirit of this, I wanted to write up a short weekend discussion of some developments from this week.

ALPP – 8-K and Unreliable Financials

On Friday, instead of releasing their much anticipated 10-Q, we instead got a very disappointing 8-K which said that their financial statements from 12/31/2020 to 6/30/2022 should not be relied upon. They specifically said that it had to do with their purchase price accounting related to their many acquisitions in 2020 and 2021 and therefore only affects their earnings, not top line. But operating income, profit before tax, income taxes accrued, and net income are materially incorrect. This is all due to ALPP getting new auditors, RSM, recently.

I had a long tweet thread on this, and in a nutshell, this is most likely what’s happening. When you purchase a company, you allocate the purchase price across various assets, both tangible and intangible. From an intangible asset perspective, you have to value amortizable intangible assets you purchased like trademarks, technology, etc. Everything else (excluding tangible assets) goes to goodwill which is not amortizable. It just sits on the balance sheet forever unless you impair it because the business you bought sucks.

Basically, this means ALPP, whatever consultants they used, and subsequently their auditors MaloneBailey, incorrectly valued their intangible assets after one or many of their acquisitions. This means their amortization figure was wrong, which means their book earnings were wrong. How wrong were they? I don’t know, and we won’t know until they re-release all of those financial statements, which is going be an annoyance and cost the company some cash in revaluing those assets but also issuing new statements.

So that sucks… but on the bright side – amortization is a non-cash item, so it didn’t really change anything that had to do with the actual business. It’s just how they accounted for book earnings, not cash from operations. Also, I’m glad ALPP fessed up to this (and that their auditors brought it up), these are the kinds of things that would normally get swept under the rug by the usual garbage on the pennies. It’s things like this that raise investor confidence.

Anyways, annoying, but they’ll get past it. Oh, and the share price barely moved, so clearly the market doesn’t care.

AITX – Moonshot of a Friday

Wow, so AITX popped like 48% on Friday. Being the OTC, I will not automatically assume it was because of their cool news that they won some awards for their firearms detection and RAD Light My Way solutions. The awards were super cool, and those are actually my two current favorite solutions of RAD (sorry RADDOG).

But holy cow that share pop was not expected. I’d like to think it was from the above news, but something tells my this is some OTC voodoo. And by voodoo, I mean some large purchases really pushing the ask and some fresh blood entering the stock. It’s kind of ironic because our Q&A on Sunday had Steve solemnly mentioning how the share price dropped below 0.01 and they couldn’t uplist to QB (side point, the QB uplist means nothing, it’s a “nice to have”). But now, hey we’re a hair above 0.01 again! Will it last, I don’t know. But it’s definitely not a bad thing 😊.

Still-to-come 10Q’s – SIRC!

The quarterly earnings release time for our lovely 12/31 year-end companies is always my favorite time. I feel like I get so much great reading material. One that I was really looking forward to reading this weekend that I couldn’t was SIRC.

SIRC has been stumbling a little bit from the financing perspective, but hey they are following through on becoming full SEC reporting and man it will be glorious to read that first fully SEC compliant 10-Q. It looks like it’s coming Monday but I was really hoping for Friday. Anyways, key things I’m looking out for:

  • Topline growth – will we hit 200m+ revenue in 2022?
  • Will we finally be cash flow positive? Can we get those days of sales outstanding down?!
  • Have margins started to trim or are we still seeing those hefty 20% + operating margins?

Anyways, very excited to read on Monday and I’ll be sure to have at least one article out on it.

New One for Me – CYBL

I’ve been talking a bit about them on Twitter, but CYBL is one I’ve been watching since they started with Operation Alpha and their share price shot to the moon. I’ve never held a position in the company, but I’ve been watching closely and I love what they’re doing. If you haven’t checked them out, you should.

They’re still early in the growth stage but are already showing strong fundamentals. That being said, we’re still seeing some of those “new company on the block” growing pains with getting filings out on time and correctly, goofy preferred share structures, etc. But all in all they have a ton of potential. Look for articles out in the future on them.

Miscellaneous Microcap Shoutouts

If anyone’s still reading this far… you’ll know I love the boring microcaps that nobody talks about but have some great inherent value in them. They’re very unsexy 😊. Just wanted to shout out a few:

  • RJDG – still my favorite “unknown” microcap. Very boring value play and it has been silent from them the last few months as we await their annual report (they’re fiscal year-end is 8/31). I still think this is THE underrated value play in the sub-10m microcap sphere.
  • SELF – I shouted them out before, but this is a micro self-storage REIT. I am very bullish on real estate over the next 20 years and also on the self-storage industry. This is a ~50m market cap company with strong fundamentals that is worth a look.
  • KSCP – this is an amazing compa… just kidding you’re better off throwing your money in the garbage disposal.
  • SKAS – I am still a massive fan of SKAS, they’ve made some good moves in selling their FBO in Kansas City. But I actually think the company is selling right at their fair value for the first time. I bought in at around 2.60 and we’re now at 5.30 which I think is a good upper bound at this time. BTW, I sold this a few months ago at around 4.00 like a bozo 😊, but locked in solid gains.
  • DDDX – last but not least, this deserves its own article but I am still big on DDDX in the additive manufacturing/3D printing industry. Check them out if you haven’t, I’m a big fan of their potential as I see onshore manufacturing as a huge opportunity over the next 20 years.

Anyways – that’s all I’ve got and thanks for reading!

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