One of the Problems With PKK Revealed Today

This morning Tenet Fintech (PKK.CN) (PKKFF) announced a partnership agreement to bring Chinese import/export businesses to China. This is good news. But it also reveals the major issue I have (and likely others in the past like Carol Penhale) with this business model. The news release states:

"Under the terms of the partnership agreement, SGT will be able to charge its clients a service fee related to the revenue that they generate from any foreign partnerships realized as a result of a connection made on Cubeler. Meanwhile, Tenet will benefit from the increased data the new SMEs will bring to the Cubeler Platform, including valuable import/export commercial data linked to all three countries."

The tone of this implies that the PARTNER can charge money for use of the Cubeler platform by its clients, but PKK does not. It merely gets this esoteric benefit of more data, which may or may not be monetized at some undefined point in the future.  

What kind of stupidity is that? It's not like the service is free. The clients are still being charged by the partner. So why doesn't PKK at least accept some cut? If the service fee is, for example, 5% from the partner, what difference will it make to clients if they get charged 5% or 6%, and PKK takes that 1%? It's not like there is going to be a whole wave of clients who will be okay with a 5% fee but balk at a 6% fee. Either the service on Cubeler is worth it to them at some small service fee or it isn't, even at 0% fee. 

This is the breakdown of logic that PKK management has when it gives away all these services for free in hopes of generating as much users and as much data as possible. Human nature is if you PAY for something, you will respect it. That's the idea behind charging tuition at colleges rather than attracting people who go to school for free and coast. Same thing behind any push to charge a flat user fee in the Canadian health care system, so someone doesn't go to the emergency room just for some sniffles.

An SME that is on the fence for any Cubeler offering might say "okay, I'll give it a shot" if it's free. Use it a few times then forget about it. An SME that is actually paying, even a small amount, will put more effort into seeking out maximum benefit on the platform. Data generated from free users is going to be of lower quality than data generated by paying users.

If you're Palantir, with over $7 billion in cash on your balance sheet, fine. Do something like this to gather as much data as possible. If you're a penny stock that has been actively killing your shareholders' portfolio with dilution, your NUMBER ONE priority is to generate as much cash flow as possible until you can pay your expenses and stop diluting shareholders. Even at the expense of some growth.

I have given up trying to reach this man but existing shareholders with larger positions than mine need to make their opinions heard on this.

My Comments on PKK

Tenet Fintech Group Inc. (PKK.CN) (PKKFF) started trading again this past week. I was surprised and impressed with this development. That new lawyer Dom Mannella must know what he is doing, and it's probably a good sign for improved corporate behaviour going forward. As part of the process, the company posted some of the agreements it has with its Chinese partners on SEDAR. This is good information for shareholders to read and had PKK been proactive in disclosing such details instead of being forced kicking and screaming by the regulators, Grizzly Research would not have had so much ammunition to write that dumb short report.

I will continue to say that the author of the Grizzly short report was an idiot. He was directionally 100% correct on the stock, but because he did so by alleging fraud, he gets no credit from me. I have written numerous bearish reports on Seeking Alpha, most of them never implying fraud or egregiously incompetent behaviour. Can people not simply say "I think this stock is overvalued and I don't believe management can attain these very aggressive revenue projections"? No, no, no. This Grizzly guy had to make all these empty allegations of fraud to gain attention for himself instead. If PKK continues with opaque behaviour, it will only attract more of these types in the future. 

This improved disclosure aside, I think there are a number of problems that must be addressed before PKK can be considered a good investment, especially after this run up. There are certain investors and backers of this company that I do not respect - anyone who has been around this stock long enough can guess who I am talking about and understand why I hold this opinion - and I think the stock will be back at the $0.05 level soon enough. This is where I think the fundamentals justify a fair value and given that the recent financings took place at this level, the check writers appear to agree with me. 

Q1 shows improvement but several concerns remain

The Q1 2026 press release can be read here and the financial statements here. These are actually some of the better financials that the company has produced, with $11.5 million in revenue and $9.9 million in cost of service, producing $1.6 million in gross margin, or 14%. This is a substantial improvement over the 1-5% gross margin historically produced. Had the company led with this fact, this would be unambiguous improvement that naysayers could not debate. However, instead of that, the company sullied the narrative by claiming Q1 2026 was its first ever profitable quarter. This is misleading as a one-time win from a lawsuit settlement is the driver for the gain:

 

 

 

 

 

 

 

 

 

 

 

 

When excluding this settlement, that $0.7 million gain is actually a $0.9 million loss. Those hoping for Q2 to be profitable will be disappointed unless PKK nearly doubles its gross margin. Most companies when reporting gains of this fashion segregate them so investors clearly understand the difference between operating profits and these one-time events. I don't believe that this was an oversight. It was intentionally presented this way in order to claim profitability in the headline. Note also that historically PKK reports EBITDA figures in its press releases. It didn't do so in the 2025 and Q1 2026 press releases. Had it reported EBITDA in Q1 2026, it would have showed negative EBITDA and the claims of profitability in the headline would have been exposed. It probably omitted it in 2025 so that it doesn't make it look that obviously inconsistent. 

Claims of profitability aside, the other issue arises from the nature of the revenue itself. Most people reading this will know what a healthy revenue trend will look like. Steady growth over time. PKK appears to generate "water tap" revenues, where the business is seemingly turned off and on almost at will. This is the third time now since I have started following the company where revenue has gone from some minuscule amount (well less than $1 million per quarter, sometimes less than $100,000) to some large amount then back to a minuscule amount. It happened in 2016 in the Jiang Wang years, then more gradually in 2018- 2021 before revenues fell off a cliff. Now the taps have been turned on a third time in 2026 for who knows how long. All of that revenue is generated by one customer, leading to more uncertainty as to how long lasting it can be. 

Let's assume that the current revenue run rate is $100 million. Margins could be substantially higher than before, but we would want to see a few quarters of that before claiming Q1 as anything more than an anomaly. True profitability feels achievable with these results, but then again we don't know how long they will last given the company's history of the water tap. 

Given this, I think $0.05 is fair value. That is approximately a $20 million market cap. That would lead to a 0.2x revenue multiple. That might appear low, but there are no shortage of small cap listings on the NASDAQ with operations in China and SE Asia with similar depressed financial ratios. Add in PKK's low margins (I'm celebrating a 14% gross margin as a big achievement, but that is still very low), revenue concentrated with one client and volatile nature of its revenue and this valuation may be generous, if anything. 

Now I know what bulls will say "He's just bashing the stock because he no longer owns it". What this really translates to is "How dare he trash the stock by stating facts before I have a chance to sell it, he's making it harder for me to make a profit". I do own some stock in DRS form from the Cubeler transaction, which I plan to hold to until $0 or $100. But besides that, I believe that I am the most honest Fintwit influencer PKK has, for three reasons:

1. In all those AMF-style documents, my name is nowhere to be found. That is despite the fact that I have been an investor and close to the company since 2014. I haven't engaged in any coordinated efforts on the stock and I haven't been paid a penny for my opinion or write ups on PKK, outside of investment gains and gaining access to be an early PE investor in Cubeler. Every word that I have written about the company, right or wrong, has been my own uninfluenced opinion and analysis regardless of who agrees with me and who I offend. If there was any weakness to it, it was reliant on forecasts and comments from company management, which I will be significantly discounting going forward.  

2. I had a $10 target and when PKK hit that target, I sold the majority of my shares and disclosed that. Rather than increasing my target based on the aggressive revenue forecasts, I took a wait and see approach. Most Fintwit influencers will gladly tell you to buy, but will never tell you when to sell. Unless they are wannabe Michael Burrys like our Grizzly friend I mentioned above. 

3. My narrative on the company hasn't actually changed. It has remained consistent. When the company fails to make good on promises, that's when my outlook has to change. As an example, this is what I wrote back in 2015:

 

Let me ask this question, in those 10+ years has PKK behaved in a way conducive to being treated like a large cap? How many years of rope should I give to this company? Back in 2018 when ASFC was starting up until it produced 9-digit revenue, there was still reasonable hope that this could be achieved. Now in 2026 with the company starting from scratch for a third time, I am not going to give the benefit of the doubt. 

What PKK must do to justify something higher than a $0.05 price

This is a list of things I wish to see in order to justify a re-rate:

1. Johnson Joseph apologizing to shareholders for past mistakes and taking responsibility for them 

I decided to make this my first point, because without this, there is no hope. How can you invest in a company hoping things will be different this time around when company management does not think it has done anything wrong? To my knowledge, I have not seen him accept any responsibility for PKK's struggles and the resulting tanking stock price. Yes, there was some bad luck, but most of PKK's wounds are self-inflicted. Bad luck aside, CEOs are well paid in their high profile position and should be scrutinized. I compared JJ to Trump in the past, and this analogy makes sense with Trump always whining about how he gets blamed when shit hits the fan or how people don't give him credit when something good happens. Whatever happened to "the buck stops here"? A company's failings ultimately lie on the CEO's shoulders. A CEO who does not accept that responsibility and recognizes that he must improve his actions is a CEO of a company to be avoided. 

The second part of making this a prerequisite to PKK being an investible stock is that JJ could come out and admit culpability at any time. Unlike the following points which are all dependent on future events and cannot be solved overnight. The only thing stopping him is his own ego. It would also be an easy victory against some bearish arguments around management's incompetence. Longs could easily say "Look the CEO is admitting past mistakes and a road map to do things smarter this time around, PKK is saved". They should want this as much as anybody. 

2. Continued revenue growth and expansion of the client base

Having 100% of revenue from one client is not a sustainable business model and will be valued very conservatively like I did above with a $0.05 fair value. PKK needs to find more clients to give assurance to the market that the taps won't turn off again.

3. Sustained and increased gross margin

Should the company achieve $100 million in revenue and maintain 14% margin, $14 million in annualized gross margin should be large enough to cover off operating expenses and R&D on the Cubeler side to eke out a small profit. Obviously we would want to see margins maintain this level or higher. Otherwise the company merely returns to the previous business model that showed a large amount of low quality revenue being pushed through at low margins. 

4. Repatriating profits from China, paying dividends and buying back shares, ending the toxic dilution

PKK has nearly 400 million shares outstanding and over 550 million fully diluted. Consider that after the reverse splits it had about 100 million shares back when it was valued at over $1 billion. This high level of dilution is toxic. The two recent financings at 5 cents do not give any assurances to shareholders that this trend of heavy dilution will end any time soon. PKK needs to not only record accounting profits and cash flows, but demonstrate that the operations in China have economic value by repatriating the funds and then using them to pay dividends, buy back shares or at least be an internal source of funding for Cubeler so that the shareholder-destroying level of dilution ends. 

5. Get Cubeler and Equity Insider finally up and running and generating revenue

Back when JJ first told me about Cubeler and the idea that would eventually turn into Equity Insider, I was excited. This was back in 2018. Eight years later and still nothing, while the landscape of the fintech and data universe has completely changed. Needless to say, I am no longer excited about this business plan. Think of how many AI startups that didn't even exist in 2018 have taken the market by storm since then. Meanwhile Cubeler has been in stasis, sitting in beta form with the same alleged few hundred SME clients on standby seemingly forever. It's time to prove that this concept can get going with no more excuses, or shelve the project and focus on what can make money. 

If these items are addressed, I can see a turnaround for PKK and shareholders. Starting with point #1 which can be done at any time. Until that time, PKK is nothing more than an expensive trading vehicle at this level and will likely eventually sink back to the $0.05 range.

Disclosure: I own some shares in PKK with no plans to buy or sell at this level.   

My Comments After Joining Sparta's Proposed Slate of Directors

As the Management Information Circular and Proxies for Sparta Capital Ltd. (SCAXF) (SAY.V) have been posted and are being mailed to shareholders, they may have noticed that my name is on the slate of  proposed directors. Assuming I get voted in on May 21, any comment specifically about the stock would be a conflict of interest going forward from that date. So I figured that I would make a (likely) final post on Sparta to expand on my thoughts about this move and penny stock investing in general. Obviously I wouldn't make this move if I wasn't optimistic about the future of the company, so that's all I really need to say past May 21. Sparta is the first company that my name is connected to in my plans, but it certainly won't be the last. 

This post is going to be divided into three sections. First, some comments about how I recommend people go about investing in penny stocks. Second, my thoughts about this as a general career move. Third, my thoughts specifically to Sparta in relation to these first two. 

If you're investing in penny stocks, be prepared to become an activist investor. 

I'll preface this section by linking to my Tipranks profile. For those who don't know, Tipranks is a site that ranks the performance of stock market talking heads. From those who write on Seeking Alpha like myself to professional analysts working at Wall Street firms. The site doesn't capture the calls of all of my articles, but it captures a large enough percentage that I can say that it's reasonably representative of my past performance. With my accuracy being slightly better than a coin flip, it's enough to put me around the top 10% of all so-called Wall Street experts. That should tell you how wrong these experts can be. I used to be in the top 5% as recently as a couple of months ago. But this forever mega-bull run has caused me to drop in ranking while my stats stay about the same as other people pass me. Keep in mind my historical calls are about 2-to-1 long to short, which doesn't stack up well to talking heads who broadly paint every call they make with a bullish brush when the S&P surpasses 7,000 at the same time oil touches $100. 

I began this section with a defence of my track record to provide context. While I have done alright on the U.S. side, my stock picking history in the Canadian small cap space is littered with failures. Penny stock investing is not a percentage game. One Abaxx should offset five or ten losers. One PKK - when you sell it at the right time instead of diamond hands-ing it forever - should offset a lifetime of losers. But some people don't seem to get that and whine and complain at every loss. Or banish the asset class forever. As if there aren't enough Enrons or Nortels or GMs or Blockbusters to go around in large cap spaces. 

When you buy a penny stock, you need to have a mindset of an activist investor. It would be beneficial to always have this mindset with any stock, but particularly for small caps. You need to be prepared to go as far as I have gone with Sparta. Popular sayings like "if you want something done right, you have to do it yourself" and "put your money where your mouth is" apply here. I complained about Sparta's behaviour in the past. Now it's my chance to personally play a role in rectifying some of the issues I see with the company and helping to improve its image to the investing community. All too often I see people complain about shorts and manipulators when they buy a stock and it doesn't go up then complain about pump and dumpers having given them bad advice after they sell at a loss. Anything to avoid taking responsibility for their own decisions and lack of action.

When I write up a stock, I make it a point to do significant research, talk extensively with management and articulate a coherent and fair thesis. I make my best effort, but if management doesn't execute on its stated plans, then *I* look like a goof. No more. This is my strategy going forward. If a company wants my support as a long-term investor (not just a swing trade), I will only do so if I think I can personally improve the business or impact management decisions in some way. 

This move also helps me as an investor in small caps in general. Being involved with Sparta's Board and Executive team will pull back the curtain on how a small cap operates. That type of knowledge can only make me a better investor within the asset class going forward. 

 My value system and career goals

When it comes to my politics and value system, I feel that I am 75% shameless capitalist pig and 25% anti-elitist "eat the rich" type. While I find many members of the terminally online anti-billionaire, Bernie Sanders-worshipping, NDP-loving movement to be lazy and completely economically illiterate, they do have a point about some of the problems with wealth inequality. Canada is a country where a certain small membership of oligarchs, oligopolies and political class have been ordained by the government (usually slathered in Liberal red) to be the elite at the top. The solution to that isn't more socialism a.k.a. more central planning, even more government control and even more taxation of the economic class who don't have the power to stop or avoid it. It's more and better capitalism. I am very much in favour of SMEs and the "little guy" trying to make it in this world. That's why I gravitated towards the small cap space in the first place.

I see articles and statistics about Canada's declining productivity and entrepreneurship. Well, no wonder when the government has ordained certain businesses to control the economy. When barriers of entry are high, that destroys entrepreneurship. In turn, large companies have no incentive to innovate because they would rather play it safe and keep their already advantaged position. Canada's horrible policies around importing cheap "temporary" foreign labour in order to suppress wages have only hurt the country's long term productivity. For every "mom and pop" restaurant you hear whining about not having enough labour stuffed down our throats by CBC, you have a company like Visionstate - actually innovating something more interesting than recipes - having to compete against cheap custodial labour hired by the corporate real estate operators. If you remove the glut of cheap labour in Canada, you force companies to innovate (as well as pay better wages to actual Canadian citizens). You might lose some business in lower productivity industries like real estate and food service, but you gain much more in productive industries like technology. 

I worked for Telus for eight years. It was a perfectly fine job working for a perfectly fine company and with perfectly fine people. I would say Telus is a typical large Canadian organization and there is nothing specifically bad about working there or representing it. But within that organization as well as with other people in my life, all I saw were people working like dogs and putting work over other aspects of life like health and family just to move up the corporate ladder. And for what? To make billionaire and millionaire shareholders 0.0001% richer? That's not me, that's not what I believed in or wanted to do. 

I needed to find an organization that did something that I believed in and I could fast forward to the top. I want to be at the top of the capitalist food chain, even if it's in a small pond. Not a cog at the bottom. Get an executive role in an organization, participate in something real and successful, then leverage that success into a career at the top. But I needed to choose my leadoff hitter carefully. I needed to find a Rickey Henderson, not an Adam Dunn (go watch baseball if you don't understand my reference). I need a high percentage play just to get on-base. Thus, the next section...

Why I chose Sparta

Anything I say in this section is going to be career related, not stock related. However, I can't deny that these two things are going to be correlated. So use this information however you want but this isn't meant to be stock advice. 

Reason #1: Sparta is profitable: Here is a snapshot of Sparta's income statements for fiscal 2025 (September year-end) and Q1 2026. From income from operations down to the EPS:

 

 

 

While Sparta has issues with the minority interest eating up the bulk or sometimes all of the profits, it's not like it's one of these companies that burns $5 million a quarter to generate $1 million in revenue. Sparta's operations actually have a lot of potential. The company just needs a few tweaks here and there to get it to the next stage. I think I can help with this.    

Reason #2: Tony Peticca as President, "face" of the company and a key decision-maker : Being in the penny stock realm for as long as I have, I have met more than my fair share of executives who are emotionally volatile, lazy, arrogant and dumb know-it-alls. Tony is the complete opposite of that. He's pretty chill and a pleasure to work with. He knows his areas of expertise and will defer to the expertise of others when he needs to. He can collaborate with people but also lead. Frankly, Sparta is lucky to have this man, especially at a time when it needed someone to hold down the fort. He made a promise to a dying man in John O'Bireck to keep this company afloat and he did that. Now what Sparta needs is a set of motivated individuals with diverse backgrounds to help him get this company to the next level. I think the company is in the process of doing that, with me being one piece of it.   

Reason #3: The remaining slate of directors: Assuming shareholders vote with management, Sparta will be increasing its Board from three to seven. In addition to me, the three other new individuals are Keith Whann, Philip Chen and Ralph Goldsilver. I encourage shareholders to read their bios in the Circular. My thoughts are as follows. Mr. Goldsilver is an experienced professional accountant and is exactly the person Sparta needs as part of its Audit Committee in order to help avoid the long periods of cease trade orders that have plagued the company. Mr. Whann has extensive legal and political experience and connections and is a capable tech entrepreneur. I have personally known Mr. Chen for many years and have my opinions on his ability as a deal-maker and business developer. But instead of getting into that, I refer to the line in his bio as a Director of Loncor Gold, which got purchased for $267 million a few months ago by a Chinese entity. He has a recently demonstrated history of getting deals done that are many multiples in excess of Sparta's current market cap. Working with this team in conjunction with Tony, I feel optimistic about Sparta going forward.   

Reason #4: Sparta looks to solve government-related problems that will result in an undeniable benefit to society: Sparta was created from the vision of an optimistic dreamer in John O'Bireck to do good in the world. Most notably in health care and recycling. Two sectors that I see massive problems and opportunities with, particularly within Canadian society. 

I see enough complaining online about the sad state of the Canadian health care system, namely the shortage of family doctors, with the blame being set at the feet of the complainer's least preferred politician. Six million Canadians being without a doctor isn't the blame or responsibility of any single politician. It is from the greed and lack of foresight from Canada's medical industry starting decades ago, and generations of politicians of all stripes being too lazy and cowardly to do the right thing and be anything other than enablers of these policies. The end result is a permanent structural shortage of health care personnel and a lack of health care access, particularly in rural areas. This shortage comes despite provincial governments spending more than ever on health care administrative bloat, and racking up debt levels to achieve it. The only way Canada is going to get out of this mess is through artificial intelligence, telehealth and other technologies that make the health care servicing process much more efficient and effective. Not by throwing more money at it. Sparta, with its Doc-in-a-Box initiative, is developing something that can potentially ease the strain on Canada's health care system and make money while doing so. Only time will tell if this or other Sparta Health initiatives gain traction. But I like the opportunity and the goodwill Sparta can generate should it be able to successfully execute on this line of business.

As for the recycling. Something like 90% of plastics in our society are not recycled. This is simply not environmentally sustainable. Most recycling programs are set up to give people a sense of ease, but are mainly just window dressing, especially for plastic. Sparta's operating division, ERS, is working on a solution called Neosort. The hope with this technology is that it will be able to correctly identify and sort plastics by their various chemical differences so that they can be sorted and recycled in an efficient manner. Hopefully this becomes a commercial success.

While Neosort and the health care initiatives are still in the start up or development phases,  the e-recycling division has been in full force for years. I see enough investors fawning over the latest gold or silver exploration play. So much excitement generated by digging stuff out of the dirt. Well below is a video of Sparta creating gold nuggets literally from unwanted junk. And it's doing so today. No PEA or NI 43-101 needed. No millions spent on drilling. No tens of millions spent on building a mine. Just gold nuggets created in the ERS plant from electronic waste. I suspect that the increase in commodity prices have been at least part way responsible for Sparta's improved financial performance over the last year.

 

 

This video was taken years ago and featured John O'Bireck, who has since passed on. Most penny stock promo videos I see are with a CEO sitting all prim and proper and eloquently speaking the right words while being tossed softball questions. Here is one done by a real media outlet in CP24. It's awkward and John stumbles through his words in his lab jacket while the host interrupts him. That's what makes it real and honest. The contrast between this video and the heavily airbrushed and edited promo ones is a perfect analogy of the contrast between Sparta - a real company - and so many window-dressed companies that never add any value for their shareholders that litter Bay Street today. This is ultimately why I am betting on Sparta. This company is destined to do great things with the right people in place and I want to be a part of it. 

Disclosure: I am long Sparta stock and I'm seeking to join the Board of Directors on May 21, 2026.