Ecosphere Technologies Inc: A Diversified Water Engineering Company With Significant Long-Term Upside Potential
I am always on a hunt for a plain long-term play in a H2O sector. In such a fragmented market, it is tough to come by a pristine play H2O association that has a hands in any square of a H2O market. Instead of perplexing to find a subsequent Xylem (XYL), we have incited my courtesy to a smaller actor that deals with this investment theme. Through targeting of an particular territory of a really specialized market, it is my opinion that benefit can be incomparable than simply throwing income into a extended formed play. The H2O marketplace is finished adult a vast series of companies such as Northwest Pipe (NWPX) all a approach to utilities like American Water Works (AWK) and a unfamiliar plays such as Sabesp (SBS).
Ecosphere Technologies Inc., (OTCQB:ESPH) is a association that has flown underneath a radar for utterly some time. This is distinct as a H2O marketplace is filled with a share of microcap H2O plays such as AWG International Water Corp (OTCQB:AWGI) and Bioshaft Water Technology, Inc. (OTCQB:BSHF). With a lapse on resources of -854.96% and -373.35% respectively, it puts into viewpoint customarily how unsure a clearly fast attention can be – and how good Ecosphere stands out opposite a competition.
Ecosphere Technologies (Ecosphere) has not been though a troubles, nonetheless these roadblocks in a past benefaction a financier now with an undervalued eventuality relocating forward. we will not try to cover adult Ecosphere’s past or stream problems as they do benefaction risks to a investment theme, though these stop signs has supposing investors with a reduce entrance indicate as a association overcomes these difficulties. Ecosphere as an investment offers a multi-faceted investment topic that will positively prerogative investors with a purify upsurge of gains over a subsequent 12 months.
Who Are They And What Do They Do:
Prior to charity a inlet of a investment opportunity, it is value observant what accurately Ecosphere does as a business. Traders might not care, nonetheless investing in a H2O zone is a flourishing topic that will not be discussed broadly here as we have in other articles in part.
Ecosphere is diversified H2O engineering, record chartering and environmental services company. This flourishing association designs and builds wastewater diagnosis solutions for use in industrial markets. Moreover, Ecosphere offers a far-reaching operation of environmental services and technologies for use in large-scale and tolerable applications.
One pivotal product that a association offers is a obvious Ozonix(R) record that can purify and recycle H2O for use in a accumulation of industries without using potion chemicals. The association is offer damaged down into dual categorical categories.
- Ecosphere Energy Services (EES)
- Ecosphere Exploration and Mining Services
The appetite services apportionment provides high volume mobile H2O recycling services generally to appetite scrutiny companies around a U.S. by function of a company’s Ozonix(R) technology. One pivotal news estimable eventuality here is that given Jul 31, 2013, an entity by a name of Fidelity National Financial Inc. augmenting a seductiveness from 31% to 39% in Ecosphere Energy Services LLC, from Ecosphere Technologies Inc. Keep in mind that Ecosphere still maintains tenure of a determining stake.
- Year over year improvements in financials demonstrates that a association has been improving not customarily a profitability and a change sheet, though also a long-term growth.
- The start of a year mostly provides a tip income entertain for Ecosphere, providing a short-term advantage as a long-term eventuality plays out.
- Ozonix(R) Technology serves a pivotal marketplace in a U.S., and is intensely singular to a marketplace and has been rarely successful. Moreover, Ozonix has customarily recently been expelled to chartering opportunities presenting an eventuality for destiny growth.
- Future of a association is extended and endless – portion mixed industries.
- The association is expanding a operation to newer technologies and is safeguarding those innovations with patents that benefaction a authorised separator to entrance that a association controls.
- The association has been a aim of several awards for a innovative technologies.
- Institutions have been loading adult on shares, and insiders in a association have also finished poignant purchases surveying that a latter is not customarily investing other people’s money, though their possess as well. Although institutional tenure is low, it provides for institutions to boost their positions that can boost a PPS prolonged term.
- Risks that can impact Ecosphere in a brief tenure and technical investigate on when to buy.
- Recent benefit and PPS target.
Thesis Items Expanded:
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Ecosphere has finished good to urge a income and profitability on a year-over-year basis. Total income has scarcely quadrupled from $8.9 million in 2010 to $31 million in 2012. Operating income has been certain for a initial time in 2012 after disastrous values for 2010 and 2011, and net income has been certain for a initial year as well. Keep in mind that these improvements have taken place as a share cost has declined in a past dual years from $0.37 to $0.25 where it stands as of a essay of this article. Compounding a faith that on a year over year basement a PPS has not kept adult with a company’s improving financials and is due for a readjustment.
(Click to enlarge)As settled progressing in this article, there is no reason to censor a disastrous aspects of an investment. They should be famous and accepted to an financier so they know accurately because a association is where it is today. It all comes down to a change square and Ecosphere still has some work to do. The association has significantly increases a income holdings, stream resources while dwindling a sum stream liabilities over a past dual years. Total liabilities have been on a decrease as a company’s collateral over-abundance has canceled out a disastrous defended earnings, nonetheless a association has to obtain a certain stockholder equity and net discernible assets. The association is on a way, nonetheless this is a long-term devise and we would not design a association to obtain certain shareholder equity until during slightest 2015. Although this does not bushel EPS and PPS expansion in a interim, it does benefaction an barrier that could be a reason for a low PPS as a association is going to need a longer timeline to obtain a certain shareholder equity value.
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The above values uncover a recently quarterly information with a many new entertain finale Sep 30, 2013 on a left, relocating to comparison buliding to a right. Working off a annual information in a some-more specific light, a association has been fast improving a shareholder equity quarter-over-quarter. The many new entertain might be means for courtesy on a decline. Although we would like to indicate out that a company’s tip income entertain will be reflected subsequent quarter, and a latest entertain shown above, finale Sep 30, is customarily one of a company’s lowest income quarter. Pointing out that a cyclically reduce income entertain for a association still reflects on a change square as a shareholder equity series gripping adult with a past entertain is good news.
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Ecosphere’s financials do not stop during a change square and income matter as other pivotal statistics. With a debt/equity ratio of 0.05x and a debt/assets of 0.04x a association is not overleveraged with courtesy to debt. With many microcap companies, debt can be a halt for investment. Moreover, Ecosphere sports a discerning ratio of 1.95x, indicating to a gentle financial position.
According to a company’s valuation, a P/E ratio of 1.70x is reduce than 90% of other companies in a Oil Well Services Equipment industry. A price/cash upsurge of 0.37x points to a company’s undervalued inlet with courtesy to income flow. On a other half of this potion of water, with a price/sales of 2.57x and a price/book 2.23x could be deterring to a discerning look. Although this is customarily a high finish of a center operation of 2.03x for price/sales and customarily over a high finish of a center operation of 1.94x for cost to book for a industry. So Ecosphere is not overvalued compared to a peers on a gratefulness aspect, a pivotal indicate advantage even while gripping a microcap size.
Now is a time to claim some of a really certain aspects of management’s efficacy on a trailing twelve months basis. Keep in mind that a microcap association has an easier time providing illusory gains, nonetheless they are positively engaging nonetheless.
- Return on Assets: 130.89% (TTM)
- Return On Equity 480.24%
- Return On Invest. Capital 256.69%
To put this into some-more viewpoint in comparison to a industry, Ecosphere is means to reinvest a benefit some-more effectively that 100% of a competitors in a Oil Well Services Equipment industry.
- EPS Growth Rate 2,051.20
Ecosphere’s benefit per share expansion is also larger than 100% of a peers in a industry.
- Gross Margin 34.57%
- Operating Margin 151.95%
- EBITDA Margin -19.76%
- Net Profit Margin 151.25%
Moving over to profitability, Ecosphere’s sum domain is in line with a industry. This means that a association has a allied volume of income to spend on operations as a competitors. Furthermore, looking during Ecosphere’s handling domain controls a costs and losses improved than 100% of a peers.
I would like to indicate out again, that this company’s financials and financial improvements have taken place as a batch has left down from $0.37 dual years ago and down from $0.49 3 years ago – presenting an investment eventuality during undervalued levels.
First Quarter Is The Best Quarter
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The above draft pinpoints a judgment of Ecosphere’s aloft income per share during a start of a year – a initial quarter. Keep in mind that a sum volume of shares has augmenting over this yearly period, so a EPS per share would be reduce over time as a volume of shares has increased. Although keep in mind that above, for a quarterly data, a many new entertain is customarily a misfortune entertain for a association – nonetheless income and income has reflected over into a change square a shareholder equity series that has kept adult to customary with new numbers.
(Click to enlarge) (Source: E*TRADE)Moving from 2008 to 2012 on a right, a series of superb shares puts a income per share draft into some-more perspective. Cemented by a progressing total of improving YoY income numbers for Ecosphere. we design a initial entertain of 2014 to be a outrageous income entertain for a association both cyclically and with a hurl out of a Ozonix Technology.
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Back on Sep 3, 2013, Ecosphere announced that is would be chartering a Ozonix(R) H2O diagnosis record on a tellurian scale. This Ozonix(R) record is accessible to each attention regulating chemicals, such as chlorine, to purify water. This record is accessible for several applications opposite a far-reaching spectrum of industries.
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- Food and Beverage
- Municipal Sewage Water Treatment
The company’s record might be new to licensing, nonetheless it is not new to a world. George Chaps, Director of New Business Development for Ecosphere has stated that a company’s record has been in use given 2008.
“As a outcome of a law Ozonix® record being used to yield over 3 billion gallons of H2O in a U.S. hydraulic fracturing attention given 2008, we are bringing recognition to some of a world’s tip engineering firms of a advantages and capabilities that a broad-spectrum modernized burning routine can yield to a several industries in that they operate.”
Expanding on reduction specific items, a association itself offers a longer list of countries that Ozonix(R) can be stable in, and a non-energy applications that a record can be used for.
Ecosphere’s law Ozonix® record can be stable in each critical nation and segment around a universe (North America, Central America, Latin America, a Caribbean, Europe, a Middle East, Africa, Asia Pacific, East Asia, India, Japan, Greater China) for all non-energy associated applications including though not singular to pellet flourishing and processing, landscape irrigation and runoff, sludge processing, aspect H2O treatment, dirt and groundwater remediation, charge and drainage H2O treatment, aquaculture and fish farming, breweries, celebration water, vineyards, dairy, butter and cheese processing, batch farms and feedlots, fruit and unfeeling production, sugarine production, automotive, pharmaceutical, biotechnology, pap and paper, convenience and H2O parks, textiles, manufacturing, microelectronics, element rubbish management, poison cave drainage, mining routine H2O treatment, metals and minerals, tailing ponds, leaching and recovery, aquariums, counterbalance wastewater treatment, sea routine water, on-board grey H2O and metropolitan sewage wastewater treatment.
Moving over to a company’s authorised barriers to entry, a association owns 5 authorized patents and has many tentative in a U.S. and internationally to strengthen a innovations. Dean Becker, Director of Ecosphere and CEO of ICAP obvious Brokerage and ICAP Ocean Tomo Auctions has settled that a association has a clever front on a IP and a chartering opportunities. Protecting a company’s business innovations, record and skill is pivotal to product split form a company’s competitors to safeguard destiny success from a singular product. Think, Twitter (TWTR) customarily owns 3 patents – a statistic that might be a problem.
“From an egghead skill standpoint, Ecosphere binds a widespread position in mixing mixed modernized burning technologies to yield germ in a many industries where carcinogenic chemicals are now being used to discharge bacteria,” settled Dean Becker, Director of Ecosphere and CEO of ICAP Patent Brokerage and ICAP Ocean Tomo Auctions. “With 5 U.S. patents authorized and dozens of U.S. and International patents pending, Ecosphere is well-positioned to strategically partner with companies that have a financial resources and geographic strech to successfully deliver a proven Ozonix® record to their particular business and markets.”
An progressing matter in this essay states a partner, Fidelity National Environmental Solutions, FNES for short, that Ecosphere has in a business. This partnership is a key aspect to a company’s stream and destiny success in brining a Ozonix(R) to applications all over a world. Dennus McGuire who is Chairman and CEO of Ecosphere has settled that this partnership is really profitable to Ecosphere’s rollout of Ozonix(R) now and in a future. FNES is a division of Ecosphere.
Dennis McGuire, Chairman and CEO of Ecosphere, stated, “We now have a world-class partner in Fidelity National Environmental Solutions and a infrastructure in place to rise a tellurian appetite market. As a result, we are focusing a efforts on bringing Ozonix® to a dozens of other applications in each city and nation around a universe where attention and a surrounding communities can together advantage from reduce H2O diagnosis costs, reduced chemical use and refuge of critical H2O resources. We demeanour brazen to operative with some of a world’s many brazen meditative companies to move Ozonix® to a tellurian H2O diagnosis market.”
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Ozonix(R) is a formidable record that is not customarily innovated, it is patented. Ozonix(R) is a multi-step process, that is really interesting. Understanding a company’s categorical product is a initial step to bargain an investment.
The initial step in a routine is ozone that breaks dungeon walls and oxidizes components to mangle germ dungeon walls apart. Ozone purifies H2O 3000x faster than chlorine (chemical used essentially in H2O utilities around a United States), and does not have to be stored.
The second step in a prices is hydrodynamic cavitation that raises a H2O heat to means chemical reactions that sports an burning intensity of 2.8V. This is achieved in seconds compared to mins in comparison to Chlorine, that needs poignant time to take effect.
(Click to enlarge)The third step of a routine uses sound waves to lift a waiter heat to over 900 degrees Fahrenheit again. This acoustic cavitation causes startle waves to means sonochemical reactions to occur. This routine is intensely effective in stealing biofilms.
The final step in this 4 layered routine used electrochemical burning that utilizes electricity to mislay sulfides, nitrogen class and adult to 99% of iron in H2O sources. Moreover it is intensely effective in stealing calcium carbonate form water. In a universe that has a H2O source with a flourishing volume of pesticides, antibiotics and other contaminants – a arguable catharsis complement is some-more than necessary.
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Look, we live in a universe with a trillion and one technologies for each partial of life. As an investor, we should be doubtful of a company’s claims with courtesy to a record offerings.
Above, we can see customarily how good Ozonix(R) stacks adult opposite a competition, and a rival advantages in a marketplace.
Future of Ecosphere as a Company
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Ecosphere has a simple, and proven business indication that they have been operative of off for many years.
The company’s technologies is a resolution to accommodate some needs of a globe’s H2O issues, portion mixed industries.
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The association has a sights on and is now doing business in a far-reaching operation of industries, so a boost are not tied to one specific industry. Moreover, these attention dissection into sub-components that a association serves. Diversification in a supposing services offer stability, as changes in one sub-sector will not mangle a bank on a company’s profitability.
Outside of Ecosphere’s innovative Ozonix(R) technology, a association has a hands on other innovative areas. Recently on Nov 26, Ecosphere perceived a U.S. obvious for a mobile solar appetite system.
- Ecosphere’s PowerCube(R) is a portable, self-contained micro-utility that uses solar appetite to yield electricity in a many remote, off grid locations.
Moreover, a product is designed to accommodate a flourishing direct for off-the-grid energy.
- The PowerCube(R) maximizes solar appetite era probable in 10′. 20′ and 40′ customary ISO shipping enclosure footprints.
The PowerCube(R) can beget appetite adult to 15 KW, to support off-grid military, disaster relief, charitable and mobile communication efforts. Moreover, a invention is law and can be ecstatic by land, atmosphere or sea. we design a new PowerCube to beget boost for a association in a entrance quarters, and given it is new is has not been enclosed in past buliding income.
Ecosphere and a technologies have not flown underneath a radar as a batch cost has in new time. The association and a subsidiaries have perceived several awards in new time for a innovations and technology.
- October 31, 2013 – Fidelity National Environmental Solutions (FNES), a auxiliary of Ecosphere, was named H2O Management Company of a year in a Midcontinent Oil Gas Awards.
To transparent adult FNES, Fidelity National Environmental Solutions is a heading H2O diagnosis provider to a appetite services marketplace and has an disdainful field-of-use permit for Ecosphere’s obvious Ozonix(R) record for tellurian appetite applications. On a company’s website, FNES is listed as a division of Ecosphere.
- Ecosphere Technologies selected as finalist for a World Technology Awards on Sep 24, 2013.
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The association and a groups have perceived several awards for a law technologies. Pointing to a fact that a association is not anticipating or forgetful for success with a products, as they have been awarded by multitude many times over.
Institutions and Insiders:
Ecosphere’s government is not customarily playmate in a association they work for, they are investing their possess income in a company.
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Management holding a seductiveness in a association is one approach to solve a principal representative problem and it also shows that government has a seductiveness in a game. Insiders have been purchasing shares lately.
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Insiders have also stressed their shopping with an 11.65% boost in institutional shares hold one entertain over entertain basis. Keep in mind that institutions still possess underneath a percent of a company, so a association is still underneath bought during a institutional level. Increased insider and institutional shopping demonstrates both parties expostulate to possess a square of a company.
Risks and Technicals
Ecosphere is a microcap company, and as such a tiny inlet of a association can be a aim of poignant swings in share price – as can be seen in Wednesday’s (12.85%) transformation with no news. Average volume of 112,883 shares traded per day on a three-month normal basement indicates liquidity so a batch is not illiquid.
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Ecosphere is subsequent both a 50 and 200 day relocating averages of $0.28 and $0.32 respectively. With an RSI of 45, subsequent a neutral 50 range, a batch is somewhat oversold as well. Moreover, with squeezing Bollinger bands on a three-month duration we see $0.25 as an glorious entrance indicate as a technicals are not bearing downside. As such, a technical entrance of $0.25 can offer poignant eventuality for a long-term topic to come into fruition.
Again, we would like to remind investors of a risks concerned in such a tiny company. Being a microcap association can lead to vast increases or decreases in a PPS and has a intensity to harm your portfolio. So before investing in a microcap company, make certain a investment is right for we and we have finished all of your due attention on a company.
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Ecosphere reported Q3 2013, YTD net income of $22 million and EPS of $0.13, this formula to an increase of $19.9 million and $0.12 over Q3 2012 YTD. This shows a company’s fast improving financials not customarily on an annual, though a quarterly basis.
Ecosphere will grow almost over a subsequent year, as it is now undervalued to start with in comparison to a industry. With a P/E of 1.7x, and a p/cash upsurge of 0.37x a association is significantly undervalued in comparison to a industry. we trust expansion is probable due to a company’s rollout of Ozonix(R) chartering on a tellurian scale and a rival advantages, a introduction of PowerCube(R), a company’s impassioned ROE, ROA and ROIC joined with a plain margins. Pointing particularly to a company’s government efficacy expansion – a association will grow during a plain rate over a subsequent twelve months. When joined with a new rollout of Ozonix(R) chartering on a tellurian scale and a introduction of PowerCube(R) – these law and impassioned rival advantages will be a outrageous success in a marketplace will outcome in plain sales and boost for a company. Keep in mind that investing in Ecosphere will be brazen of a genuine rollout of these dual products, charity an financier an extraordinary eventuality to benefit before to these items’ thoughtfulness in sales and boost numbers.
Risk 2: Caveat In The Recent Earnings Numbers
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Although a annual financial numbers are unaffected, there was a estimable one-time advantage that a association incurred for sale of partial of one of a divisions. Ecopshere sole an additional commission of a tenure of FNES to Fidelity National Financial, Inc or FNF for short. The association has state that this is a profitable sale given egghead skill has 100% sum distinction margins instead of income generated from Ozonix(R) that have singular distinction margins.
The association has settled that they keep 100% of a tellurian rights to monetize a law Ozonix(R) record in all other non-energy associated H2O diagnosis industries and skeleton to comprehend identical value as recently satisfied from a expansion and sale of a tenure seductiveness in FNES.
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Dean Becker, Director and Intellectual Property Strategist for Ecosphere Technologies went on to state how this IP monetization is customarily a start of a tellurian efforts.
Becker added, “The focus of Ozonix® in a appetite field-of-use is customarily a start of a long-term egghead skill monetization plan of inventing, patenting, innovating, production and successfully deploying a egghead skill resources opposite countless industries around a world.”
I would expected to heavily assert to investors that this transaction was a critical motorist of a company’s new benefit call. Although generally a lifeless quarter, it does have a vast impact. Moreover, we would not fast take divided these numbers as a association has settled (above) that this is customarily a commencement of a IP monetization plan relocating forward. As such we will expected see some-more exchange like this. Outside of this transaction, a company’s annual numbers are still engaging enough.
Ecosphere offers a financier an engaging brief and prolonged tenure play in a H2O industry. On a short-term basis, a batch is developed to buy.
- The technicals do not indicate to any downside, and do indicate to a lapse to a PPS during or above a 50 and 200 day relocating averages.
- The initial entertain of a new year is customarily a largest income duration for a company, that will expected boost a share price.
On a long-term basis, Ecosphere offers a financier an even some-more constrained investment opportunity.
- The rollout of tellurian chartering for Ozonix(R), and a many rival advantages that offer a vast volume of industries and sub-sectors. Moreover, this record plays into a H2O topic of a flourishing soiled H2O supply.
- The introduction of PowerCube(R) will offer off-the-grid appetite needs for a future.
- Both Ozonix(R) and PowerCube(R) are patented, and protected.
- The company’s financials, change square and income matter are fast improving on an annual and quarterly basis.
- The association and a subsidiaries have been a aim of many awards for a innovative technologies – so a marketplace has accurate a technologies value.
- The company’s destiny is extended and extensive, so a boost now and in a destiny are not related to any one specific subsector.
- The association is expanding a technologies to new areas that can be seen with a PowerCube(R) and are safeguarding these products with patents.
- The chartering rollout of Ozonix(R) and PowerCube(R) do not simulate in stream financials, charity an eventuality to deposit before they are reflected in a company’s financials.
- Institutions have been augmenting their position in Ecosphere, nonetheless still paint a notation tenure turn – so this holding value can grow as can be seen on a quarter-over-quarter basis. Insiders have also purchased shares recently. Both parties shopping shares can boost a PPS prolonged term, and a former demonstrates institutions expostulate to deposit in Ecosphere and a latter portrays management’s enterprise to possess a association that they run.
With courtesy to risks, a association also has a share.
- Then association is a microcap stock, and is theme to augmenting sensitivity and uncertainty.
- The company’s new benefit were driven by IP seductiveness sales. Although we will expected see this again and a not accurately a disastrous – it is penetrating to keep this benefit motorist in mind as it is outward organic growth.
Being a microcap association offers a common risks to a company. Moreover, a marketplace will have to accept these new products in a marketplace – as they have with Ozonix®, nonetheless we will have to see for PowerCube®. we am playmate with my topic that Ecosphere is set to outperform a market. 2014 will expected be a critical rollout year for a association and this will be reflected over a entrance buliding and generally during a finish of subsequent year. The H2O marketplace is a fragmented market, with several companies charity specific needs for a flourishing H2O hurdles confronting a world. Instead of acid for a extended formed play on a H2O market, we have focused my efforts on Ecosphere, a microcap H2O record association with a earnest future.
Disclosure: I have no positions in any bonds mentioned, though might trigger a prolonged position in OTCQB:ESPH over a subsequent 72 hours. I wrote this essay myself, and it expresses my possess opinions. we am not receiving remuneration for it (other than from Seeking Alpha). we have no business attribute with any association whose batch is mentioned in this article.
Additional disclosure: Always do your possess investigate and hit a financial veteran before executing any trades. This essay is informational and in my possess personal opinion. Understand a risks of micro-cap bonds as good before investing, as they are theme to augmenting sensitivity and uncertainty.
Article source: http://seekingalpha.com/article/1869361-ecosphere-technologies-inc-a-diversified-water-engineering-company-with-significant-long-term-upside-potential?source=google_news