Shares of Earthworks Industries and its subsidiary, Cortina Integrated Waste Management (NYSE:WM), witnessed a significant increase of 25% on Thursday, following an amendment to a debt settlement agreement with North Bay. The renegotiation led to the extension of the buy-out option payment date for $2.2 million from October to mid-April next year, as reported by Adriano Marchese.
In exchange for the extension, North Bay will acquire 3.34 million units of Earthworks, which are currently trading at 15 cents each. This acquisition is set to offset $500,000 of Earthworks' outstanding debt. Each unit purchased by North Bay includes a share and a warrant that allows the purchase of another share at C$0.40 within the next two years.
According to InvestingPro data, Earthworks has a market cap of $50.7M and a P/E ratio of 0.7, which is relatively low, indicating that the shares might be undervalued. The company's return on assets for the last twelve months is 35.82%, which suggests that the company is utilizing its assets efficiently to generate profits.
InvestingPro Tips suggest that Earthworks has been experiencing an accelerating revenue growth and holds more cash than debt on its balance sheet, which is a positive sign for investors. The company's net income is expected to grow this year, and analysts anticipate sales growth in the current year. However, it's worth noting that the company has been operating with a poor return on assets and the stockholders receive poor returns on book equity.
In addition to the unit acquisition, Earthworks will accrue an annual interest of 10% on its remaining debt amounting to $6 million. The company will also be required to pay North Bay a fee for the extension. This fee is tied to approximately 25% of the net proceeds from their next financing initiative.
It's important to note that despite the company's recent financial struggles, the company's stock has returned 10.4% over the past six months and 55.12% year-to-date, according to InvestingPro data. For more insights and tips, investors are encouraged to check out the InvestingPro product that includes additional tips here.
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