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LD Micro Small-Cap Activity Highlights and Anomalies in the Third Week of July

From Chris Lahiji comes a new summary of the LD Micro newsletter covering microcap activity during the third week of July (July 15-21). The newsletter underlines that the Russell 2000 led the race during the week, going over one percent. All other indices were in the green, with the Dow Jones Industrial Average barely being able to go above break-even.

The newsletter goes on to mention some of the week’s most notable anomalies among the biggest gainers and volume leaders, in a dedicated section put together by researcher Christian Galatti of Phase 4Research.

  • The Reason Schmitt Industries Volume Rose 998 Times (SMIT) – Inventories Could Support Growth

Schmitt Industries Inc., a U.S. designer, manufacturer and distributor of highly precise testing and measurement systems for different applications, reported a massive increase in volume during the July 15-21 week. Volume increased 998 times, with positive earnings bringing the company’s goal of achieving a profitable second half in 2018 into reality.

The anomaly, according to Galatti, is that this situation is an exact repeat of what happened in December 2017: an enormous spike in volume, followed by an increase in stock prices over $3, and then a gradual drop over the next seven months, most likely being pegged to a rights offering at $2.50 per share, in late 2017. Under that deal, the company distributed nontransferable subscription rights to purchase up to 998,636 shares of common stock at a cash subscription price of $2.50 per share. Schmitt Industries’ goal was to raise gross proceeds of almost $2.5 million.

This raise allowed the company to build an additional $1.5 million in inventory (from $4.2 million to $5.7 million), which led to an increase in manufacturing operations to satisfy growing demand, and helped generate this quarter’s growth. The inventory increase was the main cause of the reported volume spike and will hopefully continue to drive the company’s growth momentum throughout the rest of the year.

  • The VA Policy Change Increases the Market for ReWalk (RWLK) – A Bridge to Product Delivery

A U.S. Department of Veteran Affairs (VA) decision to enable exoskeleton medical device training and procurement for veterans suffering from spinal cord injury (SCI) brought Israel’s ReWalk Robotics Ltd. “back to life” with a 73 percent spike after it had touched this year’s low.

The company’s focus is the design, development and commercialization of exoskeletons that could allow wheelchair-bound individuals to stand and walk. The VA announcement gave ReWalk a big new market if its products are approved, as there are now 142 ReWalk certified private and VA SCI/D training centers across the U.S. that could train veterans to use exoskeletons and provide additional opportunities for the company.

ReWalk is yet to obtain CE and FDA clearance to market its ReStore soft exoskeleton suit in Europe and the United States. Anticipated delivery of a commercial suit is the first half of 2019, and the company plans to apply for CE and FDA approval as soon as it completes clinical and laboratory testing.

The company took steps to avoid being delisted from NASDAQ in May. As a result of positive clinical data and the emergence of a larger total addressable market following the VA decision, ReWalk was able to get back on its feet and actually score one of the largest gains of the week (89 times larger volume reported on July 20).

As previously disclosed, on May 15, 2018, the company completed the first tranche of a private placement of ordinary shares in the aggregate of $20 million to Timwell Corporation Limited (“Timwell”), issuing four million ordinary shares to Timwell. The company’s capitalization following this transaction, together with recent trading prices of the company’s ordinary shares, enabled the company to regain compliance with Rule 5550(b). With the Compliance Notice, Nasdaq informed the company that it determined that from May 15, 2018, to June 5, 2018, the company’s MVLS was $35 million or greater and the company has, therefore, regained compliance with Rule 5550(b).  (Link.)

And here are some of the newsletter’s links to key announcements:

ACQUISITION: Peregrine Diamonds Ltd. ($PGD.TO, +47%) to be Acquired by De Beers Canada Inc. for $0.24 per Share in Cash – the $107 million acquisition represents a 50 percent premium to Peregrine’s share price

Natural Health Trends ($NHTC, +5%) Issues Response to Chinese Website Allegation that It Is Under Investigation – “We are unaware of such an investigation.”

Coda Octopus ($CODA) was up 35% last week, after announcing R&D agreement with the Navy

ClearSign ($CLIR) Announces Definitive Agreement with Investment Group for $11.7 Million Equity Investment

Digital Ally ($DGLY) Obtains Complete Victory in Critical Court Ruling Against Axon Enterprise – triggers firm court deadlines and a quick path toward trial

Innovus Pharmaceuticals ($INNV, #2 gainer for the week) Reports Preliminary Q2 2018 Sales Revenue of $6.6 million to $6.8 million

RealNetworks ($RNWK) Provides SAFR Facial Recognition Solution for Free to Every K-12 School in the United States and Canada

Pediapharm ($PDP.V) Announces Annual Audited Financial Results – 61% annual revenue growth and 11th consecutive year-over-year quarterly growth

AMMO, Inc. ($POWW) Expands Distribution to Bass Pro Shops and Cabela’s Stores

Sigma Designs ($SIGM) Announces Plan for Initial Distribution of $6.00 per Share to Shareholders in Connection with Its Voluntary Plan of Liquidation and Dissolution

DarkPulse, Inc. ($KLMK) Completes Reverse Merger Transaction

Tilray joins Nasdaq in first US cannabis IPO via CNBC – the Canadian company is the first pure-play marijuana business to go public on a major U.S. exchange

For more information on LD Micro, visit www.LDMicro.com

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