EnerDynamic Hybrid Technologies (EHT.V) offers a number of products which combines solar, wind, and battery storage for pre-fabricated housing. We initiated coverage February 2017, with subsequent notes in August 2017, October 2017, April 2018, and September 2018. Here's the latest.
Sept. 25 - Announces Manufacturing and Supply Agreement. Financing negotiated with a group of private financiers culminating in the execution of a Manufacturing and Supply Agreement to fund all purchases and receivables for up to CDN $5M. The financing group will supply funding to EHT of $2.5M initially and when needed up to $5M in working capital to fund inventory and receivables from the various project that are ongoing.
Sept. 28 - Receives Purchase Order from AhmadMedix Limited Pakistan (AMP) Izhar Group of Companies. These systems will be used to showcase the ENERTEC technology in Pakistan. AMP will pay a 50% deposit with the order and the balance when the product is ready to ship.
Oct. 5 - Provides Update: Reliant: The negotiation concerning the closing continues to move forward as the parties seek to reach agreement on the final costs and sale price. The date of conclusion is expected to be in the near term with further updates to be provided as events warrant.
Burkina Faso, Ivory Coast: EHT will assess the readiness of site infrastructure. Ghana: EHT to meet government representatives to set final timeline and details related to the contract announced September 10, 2018. EHT has also completed a non-brokered private placement of $0.74M to close October 5, 2018 at $0.05 per unit with warrant at $0.075 for a five year period.
Oct. 10 - Announce Burkina Faso Housing Order. To immediately start the construction of EHT ENERTEC housing to help satisfy the need to build up to 40,000 homes. Shipment from EHT is expected on or about the first week of November with arrival in Burkina Faso in early January.
Oct. 24 - Announces Order from Ghana Health Ministry. MOU with the Government of Ghana and the Health Ministry of Ghana to supply 1,000 Community-Based Health Planning and Service unit centres (CHPS Compounds). EHT and the Ministry have contracted for an initial 200 of the 1,000-unit order. These units will be deployed in areas of Ghana where power is either non-existent or very limited.
EHT, with its ENERTEC system of structures and solar energy generation, has designed a unit whereby the CHPS will be powered by EHT's solar and battery systems. Each unit will sell for US $0.25M and EHT will commence delivery of the first units in March of 2019. These units will be used as front-line clinics in rural areas where health care has been non-existent. These five room clinics will provide urgent care and child delivery.
Oct. 31 - Provides Update. Company has relocated from Welland to Niagara Falls and re-structured finances by declining debentures representing a $14M decrease (>36%) in current liabilities. Company now has access to credit up to $2.5M to support raw material purchases.
Nov. 5 - Provides Update on Bahamas Initiative. Extended its agreement with Brieke Family Assets Ltd ("BFA") through December 31, 2025 to include all of the Caribbean as well as Florida, Texas, Louisiana, North Carolina and South Carolina.
Nov. 13 - Enters a Manufacturing and Supply Agreement with hi!farms. To supply hi!farms with 32 flowering Controlled Environment Agriculture Units (CEAU), and supporting infrastructure modules, to cultivate medicinal cannabis. Contract represents $6,3M revenue to EHT.
EHT will build and supply the initial 32 flowering units and supporting infrastructure modules to hi!farms, deferring the $6,340,000 sale price while hi!farms establishes the initial crop. Thereafter, EHT.V will receive the full sale price from 100% of the net income of each unit.
Nov. 22 - Filing of Amended Early Warning Report - The Settlement disclosed in the Prior Report was not completed and were returned to EHT.
Nov. 26 - Provides Update on Debenture Settlements. EHT.V was still in the process of completing the Settlement
Nov. 27 - Updates 100,000 House Project with Unified Construction and Government of Ghana. In conjunction with the Government of Ghana and the Ministry of Works and Housing (Ghana), the first 200-acre site to build the first 10,000 houses has been selected.
EHT and UCI advise that title to the 200-acre site will be transferred to the joint venture (which was initially announced September 10, 2018) in order to underpin the funding for Phase 1. This step provides security to the joint venture during the build period.
The project remains on target to start construction in the second quarter of 2019, as previously announced. The joint venture plans to build 10,000 house units per year, after an initial ramp up period. The houses will be built across the 10 regions of Ghana.
The Ghanaian Ministry of Works and Housing will be responsible for the final design of the houses, providing the land and ensuring the sites have access to water, electricity and roads. This ministry will also assist EHT.V in providing all import permits, licences and documentation required.
Dec. 17 - Planned Entry Into Pakistan With Two Strategic Partners ("MOU") with Izhar-Monnoo Developers (Pvt.) Limited ("IMD") to market self-sustaining, affordable green homes in Pakistan and other regions in which IMD has business interests.
EHT and IMD intend to formalize a joint venture agreement early in 2019. "AMP will concentrate on the sales of EHT's ENERTEC solar systems, shelters and PWR Wagons while IMD will concentrate on housing projects and developments."
Jan 4 - Closes Two Non-Brokered Private Placements. Completed a non-brokered private placement of $0.5M (November 30, 2018) at $0.05 cents; warrant at $0.075. Completed an additional non-brokered placement of $0.24M (December 27, 2018) at $0.08 cents - warrant at $0.12.
Proceeds from the private placements will be used for general working capital purposes.
Jan. 8 - Delivers Initial Units to hi!farms The CEAUs are the first to be delivered under the Manufacturing and Supply Agreement with hifarms, executed in November 2018, to supply autonomous grow units to hi!farms for the precision cultivation and processing of medical cannabis.
The initial units will be delivered to two federally licensed production sites in the Greater Toronto Area and will be put into service immediately to produce medical cannabis using hi!farms' proprietary cultivation systems.
Jan. 23 - Supplies Brock University and Announces Grant of Options. Brock University has selected EHT.V to supply the solar technology to power a multi-directional sign program for Brock University. The six campus directory signs will be powered by the EHT.V.
Granted 10.4M stock options ($0.10 cents).
Jan. 24 - Announces Order from Ghana Works and Housing on UN Solar Project. To supply up to 100,000 rooftop solar systems under the United Nations OPS program. The UN program will start in the second quarter of this year and will continue over the next 5 years.
EHT.V will supply 3Kw to 5Kw solar systems to the project depending on the homes requirements. The 3kw system including panels, inverter and 2 batteries will cost approximately $6000 US with the 5Kw system including panels, inverters and 4 batteries will cost approximately $10,000 US.
Feb. 11 - Provides an Update:
Ghana: Unified Construction contract for 100K homes announced last fall is moving forward. First tranche of funds ($2.8M CDN) to begin approved by Elevate Finance and awaits EDC guarantee approval in the next week.
Contract for supply of 100,000 solar roofs with UN OPS program will commence late in the second quarter of the current fiscal year
Burkina Faso: This project is currently on hold due to political instability in the country, subject to management review in 90 days
Ivory Coast: EHT.V is awaiting governmental completion of sewer and water services to the housing sites. Start in Q3
Pakistan: The first model home for the Izhar group has been completed and is ready for shipment in the near term.
Mar. 5 - Provides Update on Puerto Rico. Working with BFA and completed the testing of the new FRSIP system which will allow over 90% of the home to be built by local contractors, using ENERTEC products with unskilled labor. Potential HUD funds available.
Mar. 8 - Closes Non-Brokered Private Placement. Totaling $0.45M at $0.05 cents with warrant at $0.075 cents.
Mar. 15 - Announces Distribution Agreement with Energia Power Solutions and Ghana Update. Entered into a Distribution Agreement with Energia Power Solutions LLC (“Energia“). The agreement give Energia the right to sell the ENERTEC family of products.
Update progress on the Ghana company’s loan application with Elevate Finance and EDC. At this time it has been determined that the company needs to improve its balance sheet by partnering with a larger company. EHT plan to resubmit to Elevate and EDC in the futture.
Mar. 21 - Dr. Sohail M. Ahmad from Ahmad Medix (pvt.) ltd. based in Pakistan visited EHT's office
Mar. 28 - Update on Puerto Rico. The territory’s legislature today approved Senate Bill 1121 (PS 1121), the Puerto Rico Energy Public Policy Act, which will set the island on a path to 100% renewable energy by 2050. Forbes articles mentioned.
Apr. 4 - Announces MOU With Growratio Inc. Over the next 10 days they will work to form a joint company that will utilize EHT's Enertec Wall Panels, Lightweight Solar and off grid technology in an Agricultural Grow Unit with Growratio's superior cultivation technologies.
Apr. 9 - Updates 100,000 House Project with Unified Construction and Government of Ghana - Along with its joint venture partner Unified Construction and Investments Limited ("UCI"), and in conjunction with the Government of Ghana and the Ministry of Works and Housing (Ghana), are pleased to announce the balance of the land to build the projects, an additional 1,800 acres, has now been transferred to the joint venture.
This step provides security to the joint venture during the build period as the project moves forward. The additional lands now being provided will help the group to add a stronger partner which is necessary to secure the funding from Elevate Finance and EDC.
The project now plans to start construction late in the third quarter of 2019, having been delayed, as announced, by the need to add a stronger subcontractor to fulfill the credit requirements of Elevate Finance and EDC.
There were twenty-five news release for the period! During which the stock traded as high as $0.11 cents but closed today at $0.045 cents. There were 10 days with insider purchases and 4 days with insider sales. The insider sales were the result of a disagreement over debenture settlement now resolved.
Project Activities
Similarly to the previous period, numerous announcements and updates were provided on the Ghana, Ivory Coast, Burkino Faso, US, & Puerto Rico.
In addition, EHT.V reported new orders from AhmadMedix Limited Pakistan (AMP), Burkina Faso (on hold), Ghana Health Ministry, Ghana Works, HiFarms (canceled), Brock University, as well as, a distribution agreement with Energia Power Solutions and Growratio Inc.
Ghana and Ivory Coast projects are the biggest. These are now making progress after numerous set backs. The issue is EHT's balance sheet is such that it has been unable to secure the funds to move forward. On February 11, EHT issued a release stating that it awaited EDC guaranteed approval which it has yet to receive (release identify "next week"), One month later (March 15). EHT updated the market regarding the status.
Update progress on the Ghana company’s loan application with Elevate Finance and EDC. At this time it has been determined that the company needs to improve its balance sheet by partnering with a larger company. EHT plan to resubmit to Elevate and EDC in the futture.
Today's announcement was a positive and clearly stated that the UCI Ghana project are now set to start in Q3 2019.
Financing and Debentures
There were three non-brokered private placements for the period. Two at $0.05 cents - warrants $0.075 cents; One at $0.08 cents - warrants $0.12 cents. Total proceeds are estimated to $1.2M. In our previous note we reported, two placements 1) May 14 2018, ($0.085 cents - warrant $0.15 cents) and July 17 2018, ($0.05 cents - warrant at $0.075 cents). Until EHT secure funds for these project via EDC and Elevate, there are likely to be more placements.
As for Debentures, in their last MD&A (April 1), EHT reported a decreased in interest expense to $2.35M (2017: $4,50M) due to renegotiated debenture interest rate of 8% (from 18%) for some holders, as well as paying down loans of 12% annual interest. However, in order to reach this objective back in November 6, 2017, EHT issued 75M shares at $0.10 cents.
Peel Asset Sale
Again, the sale closure with Reliant First Nation Limited Partnership to a third party is still outstanding. The last update via release was on October 5, 2018 reported: "The date of conclusion is expected to be in the near term with further updates to be provided as events warrant". As a reminder, the original announcement regarding this matter was made on is more than 2 years old (August 12, 2016). In the last MD&A (April 1), EHT indicated:
"As indicated in the notes to the consolidated financial statements (Note 17), litigation will be required to receive the proceeds of this sale. Therefore,management has increased the allowance against the expected net amount of the asset by $3.5M (2017: $25,307) in order to bring the net realizable value of the asset to nil due to the uncertainty of litigation."
Summary
There is no doubt that the revenue potential of EHT.V is large but the company needs to find a way to fund their projects. After two years of waiting, the last MD&A (April 1) revealed to shareholders that the Peel Asset Sales are actually now a liability as there is the possibility that the funds may not be recoverable. This is yet another issue the market needs to content with and certainly not the first write off of this magnitude for EHT.
Even in the event that EHT is able to receive funding from EDC and Elevate, history has shown that the actual timeline of the projects are very much preliminary and contingent on numerous factors. Phase I needs to be complete before Phase II and the remaining part of the agreement.
Another head wind is the number of shares outstanding, along with the private placement and debenture shares issued in the last 20 months. Hence it comes at no surprise that the Management Information Circular for the AGM first item on the list is:
"(a) to consider and, if deemed advisable, pass a special resolution approving an amendment to the Corporation’s articles to consolidate its common shares on the basis of one (1) post-consolidation common share for every five (5) pre consolidation common shares outstanding to occur in the discretion of the directors at any point in time during the 12 months following April 26, 2019.
It will be interesting to see what comes in the next few weeks. The last MD&A and Management Information Circular provides additional reflections.
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