Smallcap Discoveries: Weekly Update: May 23

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Subject: Smallcap Discoveries: Weekly Update: May 23 - 27

May 23 - 27

Market Commentary

Rally time....

Markets were due for a rally, and they rallied big this past week. The Dow was up 6.2%, the TSX was up 2.7% and the beaten-up Nasdaq was up 6.8%. Technology and energy led the way. A stronger bullish sentiment took hold as the PCE Inflation Rate, after a record 16 consecutive monthly increases, finally ticked lower in April from 6.6% to 6.3%. The question everyone is asking is whether or not inflation has peaked. If so, then maybe the pressure on the FED to continue raising rates may ease.

The energy sector continues to do well with many energy stocks making the new 52-week high list this week. WTI closed the week above $115 and Nymex natural gas closed at $8.73.

Strong prices continue to encourage more drilling and we saw a big jump in the Canadian rig count as it looks like road bans are lifting and drillings are getting back out on site https://rigcount.bakerhughes.com/

I spoke with 3 different energy service company management teams this past week, and all are reporting very strong demand. It looks like they have been able to pass on price increases to their clients for the first time in a very long time. The mood is markedly more bullish than it was at the start of the year. The biggest challenge these companies are facing is labour shortages. Good times finally seem to be benefitting all in the oil patch.

But here is something to keep an eye on..... Net insider selling from the sector has picked up. Are they finally able to reap some reward for all the struggles through the lean years or do they see something else coming?

One place where we are clearly seeing deflation is lumber prices. Higher rates and a normalizing of the supply chain has pushed lumber prices lower. Since peaking in early March prices are down over 50% in less than 3 months.

While we have been hearing of many items that have seen inflationary pressure some are already feeling the effects of demand destruction and supply improvements. The capital markets are doing what they need to do. We need to remember that the cure for high prices is.... high prices.

To your wealth,

Paul and Trevor

Buys and Sells This Week

Sold Siga Technologies (SIGA.Q) @ $11.76

Sold Emergent Biosciences (EBS.Q) @ $40.06

Bought Enterprise (E.T) @ $0.39

Smallcap Discoveries

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Medexus Pharmaceuticals (TSX: MDP) Price - $2.05 Market Cap - $41M

Medexus Pharmaceuticals Provides Update on Resubmission of Treosulfan NDA
Press Release https://tinyurl.com/96t8c82a

Reads as though the resubmission of Treosulfan will be further delayed. Any significant delays will likely impact and extend the company's cash burn.

Fab-Form (TSX.V: FBF) Price - $1.00 Market Cap - $9M

Revenue of $1.13M
Gross profit of $467K
Net income of $223K
Press Release https://tinyurl.com/498rcsnu

Very solid quarter for the company in its traditionally weakest quarter.

Smallcap Discoveries

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Nanalysis Scientific (TSX.V: NSCI) Price - $1.24 Market Cap - $116M

Nanalysis Scientific Corp. Announces $160 Million Multi Year Contract Win
Press Release https://tinyurl.com/bdepx9du

BQE Water (TSX.V: BQE) Price - $32.50 Market Cap - $41M

BQE Water Reports Q1 2022 Results
Revenue of $3.5M
Adj. EBITDA of $446K
Net income of $190K
Press Release https://tinyurl.com/bdfpk596

Covalon Technology (TSX.V: COV) Price - $2.09 Market Cap - $54M

COVALON TECHNOLOGIES LTD. ANNOUNCES NORMAL COURSE ISSUER BID
Press Release https://tinyurl.com/yt44bmvc

Imaflex (TSX.V: IFX) Price - $1.18 Market Cap - $61M

Imaflex Reports Strong Q1 2022 Results and Provides Business Update
Revenue of $31.1M
Gross profit of $4.77M
EBITDA of $3.53M
Net income of $2.1M
Press Release https://tinyurl.com/9p6e8wux

Vital Energy (TSX.V: VUX) Price - $0.425 Market Cap - $35M

Announced Q1 Results
Revenue of $5.29M
Net income of $3.52M

Zedcor (TSX.V: ZDC) Price - $0.40 Market Cap - $28M

Zedcor Inc. Announces Net Income, First Quarter Results for 2022
Revenue of 4.63M
Adj. EBITDA of $1.37M
Net income of $428K
Press Release https://tinyurl.com/6pcmuftu

Appulse (TSX.V: APL) Price - $0.315 Market Cap - $4.5M

Appulse Corporation – Reporting results for the First Quarter of 2022
Revenue of $2.07M
Gross margin of $536K
Net income of $25K
Press Release https://tinyurl.com/yn873ehf

BluMetric Environmental (TSX.V: BLM) Price - $0.39 Market Cap - $11.5M

BluMetric Environmental Announces Fiscal Q2 2022 Financial Results
Revenue of $8.2M
Gross profit of $1.8M
EBITDA of $469K
Net income of $264K
Press Release https://tinyurl.com/2p9bf4ry

Redishred (TSX.V: KUT) Price - $0.85 Market Cap - $77M

Redishred Capital Corp. ("Redishred", Or The "Company") Announces Q1 2022 Results, Highlighting Impressive Organic And Consolidated Revenue Growth Of 40% And 71%, Respectively, And Organic And Consolidated Ebitda Growth Of 66% And 98%, Respectively
Revenue of $12.5M
Operating income of $2.7M
EBITDA of $4.1M
Comprehensive income of $226K
Press Release https://tinyurl.com/3ubp6cw9