Ecoark Holdings Inc (OTCMKTS:EARK) is an interesting player in the data and logistics space. The stock just started pushing off recent lows to start this week. The primary catalyst for the 50% advance appears to be an 8K filed on March 6 discussing the issuance of $700,000 of 10% Secured Convertible Promissory Note to three accredited investors for an aggregate original issue price of $700,000. According to the filing, the three Investors are officers or directors of the Company or entities controlled by them: Gary Metzger ($500,000), Troy Richards ($100,000) and Jay Puchir ($100,000).
Recent action has seen 41% piled on for shareholders of the listing during the trailing month, a rally that has pushed up against longer standing distributive pressure in the stock. The situation may be worth watching. EARK has a history of dramatic rallies. Furthermore, the stock has registered increased average transaction volume recently, with the past month seeing topping 140% over what Ecoark has registered over the longer term. It pays to take note of this fact given the stock’s relatively small trading float of not even 18M shares. It’s something the veterans know to key on: a restricted trading float and a jump in trading volume can crimp supply and push share prices higher.
Ecoark Holdings Inc (OTCMKTS:EARK) bills itself as a growth-oriented company based in the retail and logistics hub of Northwest Arkansas.
EARK’s portfolio of technology solutions increase operational visibility and improve organizational transparency for a wide range of corporate clients. Ecoark’s technologies fight waste in Operations, Logistics, and Supply Chains across the evolving global economy.
The company works to integrate people, processes, and data in order to overcome ingrained operational hurdles and create new revenue streams. Ecoark’s vision is to expose the cycles of waste that reduce efficiency and cost effectiveness across the business landscape.
Ecoark’s strategically acquired subsidiaries have anticipated and responded to key economic factors impacting every business today. Ecoark addresses these vital economic factors through four active subsidiaries, Zest Labs, Eco3d, Pioneer Products, and Magnolia Solar.
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EARK is quite an interesting play here. We especially like the Zest Labs subsidiary. But that is a good example of a project with higher capital needs. At this point, the company is already working with some debt on the books, and the latest 8K is a grab for capital, but with some more strings attached.
The market is liking the move so far, and that reflects some of the promise that seems to be embedded in this story if the company can find sufficient funding to develop on its most promising themes. The issuance of the new Notes carries a few more complexities.
The Notes, which have a maturity date of 18 months from issuance, bear quarterly interest at the rate of 10% per annum. The Notes are secured by the Company’s ownership interest in Sable Polymer Solutions, LLC. For every $100,000 of principal amount, the Investor shall receive a warrant to purchase 10,000 shares of Common Stock if the Investor converts this Note to the Company’s common stock on or before March 31, 2017. Such Warrants shall have an exercise price of $7.50 and shall be exercisable for cash until December 31, 2018. The Investors declined the Warrants.
The principal and accrued interest under the Notes may be converted at any time, at the election of the Investors into shares of the Company’s common stock at a per share price equal to $4.15, the price on the date of the Note’s issuance.
The Company may require an Investor to convert all, but not less than all of the unconverted portion of the Notes, upon written notice that (i) the last reported sale price of the Company’s common stock on each of 30 prior consecutive trading days exceeded $9.00 and (ii) the average daily trading volume of the Company’s common stock over the 30 prior consecutive trading period was not less than 90,000 shares on the trading market on which the common stock is listed or designated for quotation. In the event that the Notes are not converted, the Investor shall be repaid in cash.
Earning a current market cap value of $235.1M, EARK has a significant war chest ($4.9M) of cash on the books, which compares with about $5.6M in total current liabilities. One should also note that debt has been growing over recent quarters.
EARK is pulling in trailing 12-month revenues of $10.8M. In addition, the company is seeing recent top line growth, with sequential quarterly revenues growing at 46.5%. With promising projects in the works, access to capital, a relatively stable balance sheet, and strong growth on the top line, this is a truly interesting OTC story, and we will look forward to updating it again soon. For continuing coverage on shares of $EARK stock, as well as our other hot stock picks, sign up for our free newsletter today and get our next hot stock pick!