MicroCap Opportunities End of the Month Report - May 2025

I had the good fortune to shift my attention to microcap stocks in 2020 when potentially disruptive microcap stocks were in play. It turns out that many of these stocks were more about the story than the fundamentals, but what a great time it was to gain an education in what to look for when analyzing a startup company's potential to be a game-changing disruptor. Investing requires constant learning and adapting what you learn to the ever-changing market dynamics.

My stock portfolio has exclusively featured microcap stocks for the last fifteen years, but just three stocks have remained in my portfolio for over five years: Kneat (KSIOF) (KSI.V), Kraken Robotics (KRKNF) (PNG.V), and Aurora Spine (ASAPF) (ASG.V). The number one lesson I've learned is to stick with a stock when management clearly states the company's strategy and delivers on that plan. Otherwise sell. As long as I am satisfied with management, I add trading shares when the price weakens, and I sell half of my position when the stock price doubles.

Kneat and Kraken are examples of where my stock investment strategy has succeeded. I own shares in both for free after selling half when the stock prices doubled. Frequency Electronics (FEIM) was one of my early disruptive microcap holdings. I sold when management was unable to execute and bought back in when a change in leadership put the company back on course.

Aurora Spine has made slow progress, overcoming unforeseen obstacles. Over the last five years, the company has evolved from a third-party reseller of spine implant products to a developer of innovative spine implant products, introducing more than a dozen FDA-cleared products that now form a complete commercial program, setting the stage for record revenues and profitability.

Two stocks in our MicroCap Opportunities ("MCO") portfolio experienced explosive price action over the past month. WidePoint (WYY) stock price doubled, while NeurAxis (NRXS) rose over 200%. We did not follow our rule about selling half the shares after a stock doubles because we have been maintaining equal weight for each portfolio position. In the future, we will post an advisory when we feel it is appropriate to take profits. The two stocks remain in our portfolio because their fundamentals have not changed, despite the run-up and subsequent share price volatility resulting from profit-taking.

Our portfolio has returned approximately 20%. The results are higher on an annualized basis. We will post a full performance report in the next few days. Let's review the latest information on our stocks, including the reasons behind the sharp price movements in WYY and NRXS.

Ascent Industries (ACNT)

Initiated 4/20/25 @ $12.70

Current price $12.92

Ascent has two business segments: tubular pipes and specialty chemicals. The company introduced a new management team in 2023, bringing an extensive and successful background in specialty chemicals. The investment theme centers on the new management team's transition of the company to focus on higher-margin specialty chemicals and the divestiture of its tubular operations.

The May 12 Q1 report illustrated management's progress in orchestrating a turnaround. The reported loss was $0.10 per share, compared to a $0.41 per share loss for the prior year, along with a significant improvement in gross margin.

The American Stainless Tubing asset sale is expected to be completed before the end of the year. It will further strengthen the robust balance sheet, resulting in a profitable chemicals business selling at a multiple below 1X sales. Ascent is also a play on the tariff climate, as almost all sourcing and manufacturing is completed in the U.S.

Aurora Spine - ASG.V ASAPF

Initiated 8/28/2024 @ $0.28 C

Current Price $0.31 C

Aurora Spine specializes in minimally invasive spine devices. Its sales are almost 100% organic, and its products are FDA-cleared. As the minimally invasive spine surgery industry is still in its early stages, there is considerable market share to be gained.

Over the past few months, the company has strengthened its in-house sales force to drive revenue growth and enhance profitability, while continuing to introduce new products, providing surgeons with a more comprehensive one-stop shopping experience. The company will commence soft commercial sales of its recently FDA-cleared Aero facet device. Notably, the device was cleared for use from the cervical to the lumbar region, allowing Aurora to introduce the implant for the entire spine. No other company has gained such clearance from the FDA. Aurora plans to begin with a lumber implant and work up the spine, introducing additional implants.

Aurora will introduce its DEXA-L device in the next few months. The DEXA-L device is expected to gain popularity among the medical community, as it has a significantly higher insurance reimbursement rate.

Management has guided to profitability this year. This has been a long-term hold for us. We are anticipating strong growth, record revenues, and profitability.

Cardiol Therapeutics - CRDL

Initiated 8/21/2024 @ $1.90

Current price $1.25

Cardiol Therapeutics is a clinical-stage life sciences company focused on anti-inflammatory therapies for heart disease. The company's lead drug, CardiolRx™ for treating Pericarditis and Myocarditis, is a THC-free (<10 ppm) pharmaceutically produced ultra-pure, high-concentration cannabidiol oral formulation manufactured under Good Manufacturing Practices.

The stock price has declined since June as investors were confused by mid-stage data released for treating pericarditis. News releases cited the results as mixed. The data was instrumental in continuing the clinical trial with the most effective dosage and eliminating dosages with weaker outcomes.

The company is currently enrolling patients in a MAVEriC Phase III trial. Results from the trial are expected in mid-2026, and if cleared by the FDA, commercial rollout is anticipated to commence late in 2026 or early 2027.

Top-line data from the myocarditis FDA Phase II ARCHER trial for CardiolRx is expected this quarter. The company has exclusive rights to its pipeline drugs and is likely negotiating with large pharmaceutical companies for commercial partnerships. This is another potential catalyst for share price appreciation.

CSP Inc. - CSPI

Initiated 8/20/2024 @ $14.92

Current price $15.22

CSP Inc. provides IT, cloud, security, and computer system products and services. We have been bullish on this stock since the introduction of Aria Zero Trust Protect in July 2023. AZT is designed to prevent a malicious attack before it can enter a computer. It requires no downtime to install, and the software is operating system-agnostic.

AZT doesn't seek to prevent malware from entering a system; instead, it only allows authorized entry. It may sound too simple to be accurate, but AZT has won multiple awards. The company has bulked up its distribution network and has the potential to be a game-changer.

The 2025 Q2 report, released on May 14, demonstrated that the underlying hardware reselling and related software service business continues to perform well while the company slowly builds inroads to developing its higher-margin AZT business, which is at the heart of our investment interest.

The balance sheet is robust, with $29 million in cash. Management cited that they are signing contracts with low-hanging fruit for the potential game-changing AZT product, while geared up to capture much larger customers through its distribution network, which landed a big fish, a South African cell tower provider.

The company has supported the share price with an active share buyback program. We have some concerns and have reached out to management to talk about our perceived issues. We will provide details as soon as we can gain clarification.

Coya Therapeutics COYA

Initiated October 10/10/2024 @ $7.06

Current price $5.33

Coya is a clinical-stage company developing treatments for neurodegenerative diseases, including Amyotrophic Lateral Sclerosis ("ALS"), Alzheimer's disease ("AD"), Parkinson's disease ("PD"), and Frontotemporal Dementia ("FD"). Neurodegenerative diseases destroy brain cells, and the process is irreversible. Currently, available treatments slow the disease's progression, but there is no FDA-approved cure for neurodegenerative diseases. Coya is targeting filling that void.

Coya has partnered with Dr. Reddy Labs to develop and commercialize COYA 302 for ALS, a deal that could be worth up to $700 million if all goals are met. Coya 302 combines Coya 301 and a drug from Dr. Reddy's. The company will receive $8.2 million from Dr. Reddy upon initiating the Phase 2 ALS study, which is expected this quarter. Also expected this year is a partnership for the development and commercialization of Coya 303, a combination of Coya 301 and GLP-1, for the treatment of ALS.

Other potential catalysts for share price appreciation in 2025 include the following:

• Q1 2025: Additional data from the Alzheimer's clinical trial.

• Q2 2025: Topline results from the FTD study.

• Q2 2025: Submission of additional nonclinical data to support the start of the COYA-302 Phase 2 trial in patients with ALS

• Upon IND acceptance and first patient dosing of COYA-302 in ALS, eligible to receive milestone payments of $8.4 million from strategic partner, Dr. Reddy’s Laboratories (DRL)

• Q2 2025: Publication of COYA-303 combination mechanistic data

• Q2 2025: Publication of data documenting the role of inflammation in Parkinson’s Disease

• Q2 2025: ALS Biomarker data. Publication of longitudinal data on Neurofilament Light Chain and oxidative stress markers in patients with ALS

• 2H 2025: Additional single-cell proteomics data from the completed investigator-initiated, 21-week, double-blind, placebo-controlled, exploratory Phase 2 study of low-dose interleukin-2 (LD IL-2) in patients with Alzheimer’s disease (AD)

• 2H 2025: Filing of IND for the COYA-302 Phase 2 trial in patients with FTD*
  (*Clinical trial initiated upon FDA IND approval)

Delcath Systems DCTH

Initiated on 1/8/2025 @ $11.85

Current price $16.21

Delcath is a hybrid medical device company that treats primary and metastatic liver cancer. It is very common for primary cancer from other body organs to metastasize in the liver, as the liver filters out harmful substances from the blood.

The FDA cleared the company's Hepzato Kit in August 2023 for treating metastatic ocular melanoma ("mOM"), an eye cancer that spreads to the liver. This is the first FDA-approved device for treating the entire liver. Delcath intends to develop Hepzato into a platform for treating all types of liver cancer and currently has two Phase II clinical trials in progress.

Delcath reported positive free cash flow for Q1 and a strong balance sheet with $59 million in cash and no debt. The company is on target to have 30 active medical centers by the end of the year. The average treatment rate per center is two per month, which is expected to increase as each center maximizes its potential. Management guided revenue growth for 2025 of over 150% over the prior year, reaching at least $94 million.

The stock is expected to be added to the Russell 2000 index in June. That would result in buying about 4 million DCTH shares for the index. That is heavy buying considering that only about 33 million shares are outstanding, and only half of the outstanding shares are available for public trading.

Frequency Electronics - FEIM

Initiated on 8/14/2025 @ $12.15

Current price $19.24

Frequency Electronics designs, develops, and manufactures precision time and frequency generation technology for satellites and secure terrestrial communication, command, and control. The majority of revenue is derived from U.S. government contracts.

The company is the world leader in precision time and frequency generation technology. The satellite industry is undergoing a paradigm shift, and Frequency is successfully leveraging its technological superiority while adapting to this changing industry. The secret sauce for the company's success has been continued strong sales from established products, combined with the addition of new products.

The company reported 2025 Q3 results during March. The reported revenue of $ 49.8 M for the nine months, compared to $39.7 M in the prior year, is the highest in ten years. The backlog remained high at $73 M, slightly lower than the $78 M for the previous fiscal year. Following the earnings report, Frequency announced a $12 million contract to deliver synchronization products over the next three years. The balance sheet is solid, with $27 M in working capital and no debt.

President Trump's Golden Dome plan could be a vast potential tailwind for Frequency Electronics.

Gossamer Bio - GOSS

Initiated on 9/9/2024 @ $0.91

Current price $1.11

Gossamer Bio is a clinical-stage biopharmaceutical company with a single drug pipeline: Seralutinib. Seralutinib is focused on treating pulmonary arterial hypertension ("PAH") and pulmonary hypertension with interstitial lung disease ("PH-ILD").

The company is currently enrolling patients for a Phase III Prosera clinical trial, with improvement in six-minute walk distance as the primary endpoint. Gossamer has partnered with a large pharmaceutical company and strengthened its leadership team to expedite the completion of the regulatory process and the anticipated commercial rollout.

Top-line results for the Prosera Phase III PAH clinical trial are expected in Q4 2025. Smaller potential catalysts, such as the introduction of Seralutinib to the medical community and analysts' estimate revisions, also exist. The company had $258 million in cash as of the end of March 2025, sufficient to fund operations for the next two years or more.

Kneat - KSIOF KSI.V

Initiated on 8/14/2024 at $4.64 C

Current price $6.45 C

Kneat is a first mover in digitalizing validation and quality management compliance. The company continues to add new customers and is pushing toward profitability. Contracts start small and grow into values exceeding $1 million annually within two years. Since contracts with smaller companies won't significantly impact overall earnings for two years, these deals are typically announced on social media platforms, such as X. Contracts with larger companies are disclosed through press releases. Kneat is signing major deals almost monthly. In May, a new global diagnostic customer was announced.

Q1 was another record revenue quarter as the company continues to scale. The stock trades at expensive multiples relative to its peer group, but these multiples do not account for the land-and-expand nature of Kneat's business model. The stock is becoming more attractive as profitability is now within reach. The stock price recently hit a new high, but if the company establishes profitability as expected, we should see an accelerated price appreciation rate.

Kraken Robotics - KRKNF PING.V

Initiated 8/11/24 @ $1.27 C

Current price $2.40 C

Kraken Robotics is an underwater technology company that provides imaging sensors, batteries, and subsea robots primarily for the defense and offshore energy industries. Kraken is a first mover in unmanned underwater vehicles ("UUVs") equipped with synthetic aperture sonar ("SAS")and is the only pure-play related to UUVs that I could find.

The stock trades at rich multiples but is widely considered a likely acquisition. Kraken was the top performer on the TSX Venture exchange for 2024, the fourth time the stock has been included in the annual TSX Venture Top 50 list.

Kraken recently announced its most significant battery order and opened a new production facility in Nova Scotia. Besides the monetary size of the order, the company has developed a new LG battery cell pouch that is smaller and can fit into vehicles that its legacy batteries can not. These new batteries are cheaper and more powerful. The company recently announced the acquisition of 3D At Depth, allowing it to expand its product offerings and establish a U.S.-based footprint.

Q1 was a weak quarter as expected, but the future remains bright. Management is guiding a 40% growth rate for 2025, unchanged from prior guidance.

NTG Clarity (NYWKF) (NCI.V)

Initiated on 4/6/2025 @ $1.55 C

Current price $2.74 C

NTG was founded in 1992 by Egyptian-born Canadian electronics engineer Ashraf Zaghloul. The company has led the way in providing digital transformation services in the Middle East. It is leveraging its long history of conducting business in the region to gain market share in the trillions of dollars earmarked by the Saudi Arabian government for its Vision 2030 program. The Saudis are transitioning from an economic dependence on oil to developing infrastructure, expanding banking, technology, and manufacturing activities.

The company enjoys a competitive advantage over larger competitors in the Middle East by offering Arabic language IT professionals. NTG offers educational programs in Saudi Arabia and Egypt to train individuals for IT careers, ensuring the company has qualified staffing to meet demand.

NTG is profitable, sells at a modest valuation, and is experiencing explosive growth. Revenues and gross profits for fiscal 2024 were over 100% higher than the previous year. The company is benefiting from an expansion of services utilized by its customers. Q1 2025 revenue rose 68%. Management guidance of $78 million for this fiscal year results in a 45% increase over the prior year, but also indicates that the three remaining quarters will be flat in comparison to Q1. The company has embarked on a hiring spree, which suggests that it is preparing for new contracts, which would likely push revenue growth higher for this year. We don't believe that the company will undertake a capital raise; however, its cash position is insufficient to fund operations for the year without an improvement in accounts receivable.

We would love to see the stock uplist in both the Canadian and U.S. markets, but the cash flow needs improvement first. The stock is an excellent play on avoiding tariff-related pressure that many other stocks face. A detailed write-up on Clarity from our friend Aditya, who is worth following, can be found here.

NeurAxis - NRXS

Initiated on 8/18/2024 @ $3.18

Current price $2.73

The company continues to expand its insurance coverage for the FDA-cleared IB-Stim treatment for irritable bowel syndrome. The IB-Stim received FDA clearance on May 20th for expanded pediatric nausea treatment, doubling the device's total addressable market (TAM). Day traders promoted the news, and the stock price surged over 200%.

Management seized the opportunity to raise $5 million, and another $1 million was added to the company's cash position from the exercise of warrants. The balance sheet looks great with $6.8 million in cash and no debt. There are 9.5 million shares outstanding. Fully diluted, adding in warrants, options, and preferred shares, there are 17.3 million shares. The company is well-funded as it prepares for increased demand for the IB-Stim in January when the Category 1 reimbursement code takes effect.

The company continues to add insurance carriers for IB-Stim coverage and expects to double the number of lives covered by the end of this year. At the same time, it has begun a soft commercial rollout for its second FDA-cleared medical device.

For more information, please refer to our recent write-up.

TAT Technologies TATT

Initiated on 1/8/25 @ $25.31

Current price $26.03

TAT provides thermal, auxiliary power units (APUs), and landing gear solutions to the original equipment manufacturers (OEMs) of commercial and military aviation, as well as to the maintenance, repair, and overhaul (MRO) industries. The company is based in Israel, but most of its work is performed in the United States.

Our investment thesis is that TAT benefits from the strong demand for its products, which is driven by supply chain disruptions. Aviation supply chain issues have led to shortages of airplanes. As the fulfillment of new airplane orders takes at least six years, it will take years for supply to catch up with demand. The lack of new airplanes to meet demand results in the extended service of existing aircraft and increased demand for airplane components, such as those manufactured by TAT, for at least the next five years.

2025 Q1 revenues of $42 million were a 24% improvement over the prior year, while EPS of $0.34 exceeded expectations by $0.04. The company reported a strong and growing backlog of $439 million as well as expansion of its Auxiliary Power Unit serving additional Boeing and Airbus models. The share price declined following the announcement of a capital raise through the issuance of shares at $26 to fund the expansion.

VSEE Health VSEE

Initiated on 1/13/2025 @ $1.31

Current price $1.26

Vsee offers customizable telehealth through building blocks that customers do not need to program or code. The Vsee platform also provides highly secure communication and transactions. New contracts announced in January doubled the company's annual revenue, and four contracts were announced in February. In March, the company announced the renewal of its autonomous self-driving robot solution for hospitals.

The company is late filing its 2024 financial report and the Q1 2025 report. A reason has not been provided for this delay. We have asked the company to give a public notice to explain.

WidePoint - WYY

Initiated on 11/15/2024 @ $3.75

Current price $3.01

Wide Point offers SaaS services, including identity, mobility, and access management. Its revenue is 80% derived from the U.S. government and 20% from commercial, state, and local customers. Almost all of its revenue is predictable and recurring.

The stock trades at a steep discount to its peer group due to lower margins, as a significant portion of its revenue is pass-through with zero margins. This masks double-digit revenue growth, positive adjusted EBITDA over the last seven years, and four consecutive quarters of free cash flow.

Expanding government contracts, introducing a new certification, launching a new product, and a new strategic partnership are potential catalysts for the stock to re-rate.

Investors feared that the uncertainties surrounding U.S. government agencies would hurt WYY. The company benefits from aligning with DOGE's objective, as we discussed in a recent article. The stock price doubled after the article, but investor fear returned when the company reported a minor adjustment to align the time frame for previously reported numbers on its 2025 Q1 report. Missing the top and bottom numbers also refueled the Doge impact fear.

The company's largest customer is the Department of Homeland Security, with a contract renewal due in November. The new DHS contract is expected to be much larger in value and term than the present contract. It is doubtful that WYY will not win this renewal.