Reverse Mergers & Low Float Plays

[Potse]

ECGR(.17)...institutional investment, anti-toxic financing clause......

Added to my position yesterday with some blocks around 16 cents, following the release of an amended 8-K. Most of my previous purchases were made around 10 cents. There is some risk that the consultant might receive significantly more shares over the next year and the company will likely need additional financing, but overall I think the risk/reward continues to look fairly interesting to me. The artificial intelligence sector should continue to produce some decent gains. I've been very pleased so far with my investment in GLAI (formerly WSCO), and I think ECGR has a chance to do quite well.

Depending on exactly how I want to look at it, I figure ECGR has roughly 3-4M legacy shares. Given the sector and the relatively tight share structure here, a minimum $1.5M legacy share valuation seems completely reasonable to me. So I will be disappointed if I walk away from ECGR with anything less than 40-50 cents per share.

A couple of things I found noteworthy in the amended filing.......

1) It appears that a large institutional investor (Ionic Ventures) purchased 2M shares in the financing at 5 cents.

2) In the original filing there is a clause that prohibits ECGR from using any type of floorless financing until all of the debt owed to the consultant is paid off. If you scroll all the way to the bottom of yesterday's amended 8-K, there is a pretty interesting modification to the debt agreement between ECGR and the consultant (Coral Investment Partners -- Erik Nelson). That modification actually goes one step further and extends the ban on toxic financing for as long as Coral has ownership of any ECGR shares.......

18. Limitation on Share Issuance: The Company hereby agrees to the following terms and conditions limiting the issuance of shares of common and/or preferred shares.

A. The Company hereby agrees that it will not increase its authorized common shares until such time as the debt owed to Coral has been repaid in full

B. The Company hereby agrees that it will not issue, or enter into any agreement that will cause it to increase its total number of issued and outstanding shares on a fully diluted basis above Fifty Million (50,000.000) shares until such time as the debt owed to Coral has been repaid in full.

C. For as long as Coral shall own any shares in the Company, the Company shall not enter into any debt agreement or issue any preferred shares or warrants that contain a conversion feature deemed, at the sole discretion of Coral, to contain a ''floorless" of ''floating" conversion feature. For the purposes of this Addendum a floorless, or floating conversion feature shall be one that converts at a discount to the market price of the Company’s common shares without a downside, or lower price limit.