A deeper dive is more telling.
2020: Diluted EPS
1,009,522
191m Share Count / EPS 0.54c
2021: Diluted EPS
1,753,416
245m Share Count / EPS 0.71c
However adjusting for tax benefits…
2021 (pre tax benefit)
1,753,416
(627,872)
1,125,544
245m Share Count / EPS 0.46c
{on a 2020 comparison of 191m shares eps was 0.61c}
Breaking the results down further we see…
2020
1,009,522
(676,097) other income
333,425
191m Share count / EPS 0.18c
So reviewing the numbers we can see that “other earning” in 676k (59.7k/2021) was made up of 608k debt forgiveness (I can under this takes place in the early stages of some micro caps). So after removing other income from 2020 and 2021 the earning per share comparison is 0.18c v 0.43c.
Summary: I can understand in the early days these micro cap businesses may use personal loans (Director’s etc) to fund growth. However, the recent capital raise (40m @ 12.5c) in April should now see them with a sufficient cash buffer to phase this practice out (note this led to an increase in the share count by ~28%).
The main questions for me then are what cost controls (like the current consolidation of 4 smaller warehouses into one large one (leasing of it from an entity controlled by the MD was audited by two independent companies) and opportunities to sell higher margin products (such as the recent move into gaming products) exist for them to generate sufficient cash to growth without, further dilution and at the same time increase their bottom line.
Consequently, I am happy to give this another 6-12m to play out. As such, with significant inventory now ready to sell, I want to see a greater % of gross profits dropping to that bottom line and the business beginning to stand on its own, with signs it can generate adequate free cash flow if I am going to consider this a long term play.
