International Wastewater Systems (IWS:CN) is a company focused on using sewage as a source of renewable energy. In short, it taps in the sewer system of a building and capture the heat from the wastewater. It harnesses the energy for HVAC systems. SHARC and PIRANHA, are their main products.
Since our initial coverage, the following development have occurred.
Apr. 28 - Q4 Earnings: reported a loss of $4.5M for year ending Dec. 31 2016.
May 2 - Contract of ($330,000 USD) to supply SHARC to "District of Columbia Water & Sewer Authority (“DC Water”) in Washington, DC, USA.
May 8- New CFO appointed.
May 30 - Announcement of private placement of $2M with warrant at $0.30 cents.
May 31 - Closes $1.32M of $2M private placement (first tranche).
Jun. 6 - Q1 2017 Earnings; reported a net loss of $1M for period ending March 31, 2017. Cash balance was $176,998 (December 31,2016-$373,430)
Jun. 30 -Closes private placement from May 30 2017, totaling $2.2M with warrant at $0.30 cents.
Jul. 11 - Summer News Update provided. DC Water Headquarters Project construction reported as active. DC Water expects to install IWS’ SHARC system in the Fall 2017. Also reported was the completion of the final designs (signed off and submitted for approval) for the installation of SHARC systems at the Aqualibrium Leisure Centre and Kelvingrove Museum in Scotland.
Jul. 30 -SaSko (Sashko) Despotovski as Independent Advisors to refocus its efforts on international opportunities in the green energy sector.
Aug. 3 - The company has taken 974 sq. ft of office space at Clyde Gateway’s serviced offices at Red Tree, Bridgeton on a two year license. Office will serve as the new European Headquarters. The company also announced the cancellation of 5.1M stock options.
Sep. 8- Change name from "International Wastewater Systems" to "Sharc International Systems Inc.” - SHRC will be the new trading symbol. In addition, the company announced consolidation of shares on a 3.5 to 1 share basis. Both change will be effective on September 12, 2017.
As displayed in the chart above, the stock lost more 80% of its value in the past year. Looking back at the earnings, it is evident that the company has been unable to monetize much of the deals announced within the last 12-18 months (i.e. RENEW Energy Partners LLC, Scottish Water Horizons, Beijing Ruibaoli Thermal Technology, and Prospect Silicon Valley). It's understandable that these are very large projects for which a lag between the initial agreement and construction can be lengthy (i.e. Notably, the project with the Scottish government took 15 months from agreement to construction).
At issue, the company has failed to provide guidance on revenue for the first 6 months of 2017. In addition, little to no updates have been received on the RENEW Energy Partners LLC, Bejing Ruibaoli, and Prospect Silicon Valley. Specifically, the lack of update on the RENEW Energy Partners LLC deal is significant. At the time of announcement last year, it boasted a $60M order for the next five years and led to a 52 week high last year. The lack of updates on this deal seem to have accounted for the slow but steady drop in the stock price. Hence, the position the company has found itself in is very much self-inflicted, they have failed to provide updates to the market and manage shareholder's expectations.
While the company's business model; a zero installation cost for install, in exchange for a recurring revenue streams (paid over multiple years) for energy savings is a clever one, it must be able to make it work for them and sustain itself in the period where little revenue is expected.
In the last interview with SmallCap-Investor.de (June 27, 2017), the CEO reported that he believed that shareholders would be pleased of the company results in the next 6-12 months. He claimed that much of the work on the Scotland project will be done within 3 to 9 months as the project needs to be completed within 18 months. In addition, he claimed that no financing would be required as they can leverage existing contract against their need for credit. He also reminded shareholders that the contract in Scotland were "guaranteed" and he believed that the company had "turned the corner..."
Well, the interview had little impact on the trend of the stock price as it continued to drop ever since. It seems that the market did not "buy"/agree with his assessment. The result is such that the company hit a 52 week low of $0.105 cents on the news of share consolidation in the past week. Ironically, it was the price that was referred to by the interviewer: Joachim Brunner on June 27th. No doubt, the recently announced stock consolidation caught investors by surprise. Again, no rationale was given for the action by the company.
One thing is certain, SHRC will need to better communicate with shareholders to make a full course correction. The consolidation and ticker change won't be enough. However, the company does have a proven technology and is making progress on a landmark project (Scottish Water Horizons) which will be significant for future business development efforts in Europe and worldwide. Additionally, SHRC's offering is needed in a world where climate change is more and more evident. As a result, we still remain long on the company and we're expecting better days ahead.
Below is the forecast for next week, it will be interesting to see if they start turning the corner.
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