Sharc International Systems Inc. (SHRC) is a company focused on using sewage as a source of renewable energy. We initiated coverage on April 2017, September 2017, and an update in March 2018. Since our last update, a number of releases have been issued.
Apr 19 - Non-Brokered $2.5 Million Private Placement at $0.40 cents with Warrant at $0.60 cents. Proceeds to go to "advancement of the Company's projects that are currently in the pipeline and will also be evaluating new project opportunities as part of its business model."
May 2 - Presenting at U.S. Department of Energy's National Renewable Energy Laboratory (NREL). Selected through a competitive application and review process. NREL is the U.S. Department of Energy's primary national laboratory for renewable energy and energy efficiency research.
May 8 - Andrew Muirhead & Son Limited signs heat supply agreement. It is the first customer as part of the wider Clyde Gateway development.
May 15 - Close First Tranche of Non-Brokered Private Placement of April 19th. $2.3M raised.
May 25 - Air Treatment Corp. (ATC) Sales agreement covering US states (CA, AZ, UT, ID, CO, HI, NV) and, U.S. territory of Guam in Micronesia.
Jun 8 - Closing of Over-Subscribed Non-Brokered Private Placement. Gross proceeds, of $1.5M at $0.40 cents with Warrant at $0.60 cents. The placement was over-subscribed and raised a total of $3.9M of the proposed $2.5M previously announced April 19.
Jun 12 - Agreement with Frontier Refrigeration & Mechanical Services Ltd. (“Frontier”). Frontier will cover the province of Manitoba.
Jun. 18 - Announces Funding for the Clyde Gateway Regeneration Project to support the construction of the district heating scheme in Glasgow, Scotland. Initial capacity of 2MW with room to expand further as the development grows.
Close the initial funding of £3.7 million (CDN $6.37 million), with repayable assistance from the Scottish Government’s Low Carbon Infrastructure Transition Program (the “LCITP”), supported by the 2014-2020 European Regional Development Fund programs. The LCITP support is matched to commercial loans and investments from the Energy Saving Trust, Clyde Gateway and SHARC Energy Systems.
Also announced under this release CFO, David Alexander leaving due to health reasons. Interim replacement provided by Hanspaul Pannu, CPA-CA.
Aug 29 - Earnings. Continues to show a loss and weak revenues.
In the last six months, SHRC has continued its progress. In addition to the NREL presentation, the company secured oversubscribed financing ($3.9M from original $2.5M), advanced the Clyde Gateway Scotland Project, and completed sales agreement with ATC, Frontier. The latter add to previous agreement with Midwest Machinery Co, Johnson & Barrow, and Highmark (NYC). The recent agreement with ENGIE is another positive development for SHRC, as ENGIE is a well-known utility in Europe. The latter coupled with the announcement of a new Head of Sales were welcomed by the market.
However, the departure of another CFO (health related), was a set back as SHRC is in a critical phase of its growth where fiscal discipline is needed. Recent earnings for the quarter showed weak revenue but the company is definitely on a better position looking at cumulative results from last year. Nonetheless, the loss for the period and cash on hand are similar year over year. There also has not been recent updates on the DC Water project, and other past initiatives such as the RENEW Energy Partners LLC and Prospect Silicon Valley. These are important milestones for SHRC to follow up on as the market need to know that the company can close on past major announcements.
In an interview with SmallCap-Investor.de (June 2017), SHRC's CEO (Lynn Mueller) reported 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 would be done within 3 to 9 months and that the project needs to be completed within 18 months. In addition, he specified that no financing would be needed as SHRC should be able to leverage existing contract to meet their need for credit. He also mentioned that the contract in Scotland were "guaranteed" and believed that SHRC had "turned the corner..."
If one looks back, it has not been the case. While the Clyde Gateway Project is advancing, it may be delayed. Granted, this is a very large project with many stakeholders so delays are expected. However, where a private placement was not needed, it did occur - no doubt related to the former.
Nonetheless, the recent options granted at $0.44 and $0.60 cents were on par with the recent financing ($0.40 cents). Currently, SHRC is trading above these levels which indicates positive investor sentiment. It is still early days post-earning so time will tell - SHRC is still turning.
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