Eco Building Products Inc (PINK:ECOB) are Fighting Fire with Fire
Back in October hurricane Sandy thrashed the East coast and a lot of people thought that this was the beginning of the end for our small planet. Luckily, the apocalypse has been postponed for now, which however, means that someone should start re-building what Sandy demolished. Eco Building Products Inc (PINK:ECOB) claim that they have what it takes to do it. If only we could be as optimistic as them…
Let’s start with the background facts: ECOB is a company that was established in 2007 and since then they have been devising chemical solutions, that are supposed to help wood withstand fire as well as mold, fungus and other nuisances. As you might guess from the company’s name, they are very proud of the fact that their solutions is supposedly completely “green” and it doesn’t interfere with the environment in any way. Which, of course, is very nice.
Just hours ago, they went on the news and told us that they have signed a contract for the building of some triplexes in California. Naturally enough, they will be using their revolutionary wood-protecting solutions. They are also very happy to inform their shareholders that the contract will bring ECOB wealth and fortune. This is where we began to get just a tiny bit dubious.
According to ECOB, the contract will bring them gross profit amounting to $380 thousand. “Not bad”, you might think. They don’t mention, however, how much the whole thing will cost them, and looking through their financial reports, we think that the answer to this question is”A lot”. The last quarterly report will tell you that they have generated a total of $1 million in revenue. Once again, “Not bad” considering the small cap status. When you put in the operating expenses, however, you will see that the net loss for the period of only 3 months is a whopping $2.1 million. Having that in mind, the contract for the elusive $380 thousand, will probably bring them nothing but more losses.
The rest of the financial statement is just as depressing:
- cash: $3 thousand
- total assets: $5.3 million
- current liabilities: $6.2 million
- total liabilities: $9.5 million
The bad news don’t stop there – ECOB signed a credit line back in 2011 when they secured a debt of $5 million. The creditor is a Singapore company called MRL and because ECOB are unable to pay off the debt, they were forced to issue MRL a total of 81 million shares, and a further 50 million options that are exercisable at about a third of the current price. Unless they would like to make their shareholders even more upset than they are now, ECOB will need to start paying off this credit as soon as possible. And, by now, you have probably guessed it that it’s going to be tough.
We’ve seen many small companies that have risen and subsequently fallen over the years, however, it would seem that the ones promoting themselves as “green” are the ones that are most susceptible to spectacular crashes. Such is the case with Casey Container Corp (PINK:CSEY). They also claim that they have a patent pending technology that is supposed to save the planet and last month they were heavily promoted. It all went down in just a couple of weeks, though, as the handy chart on the right shows.
This is just one in a long line of examples that show how sometimes big words don’t necessarily mean big things. It also shows that before you invest in any company you should be sure to make a thorough research and check carefully for any underwater rocks. In the case of ECOB, there are plenty of them.
